Zee Entertainment Enterprises Limited Annual Report 2009-10

Taking entertainment places Forward looking Statements In this Annual Report, we have disclosed forward-looking information to enable investors to comprehend our prospects and take investment decisions. This report and other statements – written and oral – that we periodically make contain forward-looking statements that set out anticipated results based on the management’s plans and assumptions. We have tried wherever possible to identify such statements by using words such as ‘anticipate’, ‘estimate’, ‘expects’, ‘projects’, ‘intends’, ‘plans’, ‘believes’, and words of similar substance in connection with any discussion of future performance. We cannot guarantee that these forward-looking statements will be realised, although we believe we have been prudent in assumptions. The achievements of results are subject to risks, uncertainties, and even inaccurate assumptions. Should known or unknown risks or uncertainties materialise, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated, or projected. Readers should keep this in mind. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. contents

01-15 Where are we? 08 Regional GEC 02 Zee Network 10 Sports Taking 04 Hindi GEC 12 International Entertainment 06 Cinema 14 Taking Entertainment Places Places

16 Chairman’s Message 33 Alternate Lifestyle 18 MD & CEO’s Review 34 Sports 20 Corporate Information 36 Regional GEC 21 Mission & Values 43 International Presence 16-48 22 Financial Highlights 44 Music Operational 24 Operational Highlights 46 English Content 26 ZEE - The 5 Minute Read 48 Our People Review Business Division Summary 28 Hindi GEC 30 Cinema

49 Notice 103 Standalone Financial 55 CFO Certification Statements 56 Directors’ Report 141 Consolidated Financial 49-172 66 Statement Pursuant to Section 212 Statements Governance & 70 Report on Corporate Governance Attendance Slip and 81 Shareholders’ Information Proxy Form Financials 88 Management Discussion and Analysis 12 56 16 International presence chairman’s message directors’ report are we we are here Taking Entertainment Places Operational Review Governance & Financials 3

It is the entertainment buffet extraordinaire of the century, and everyone is invited.

We offer one of the largest spreads in the business with innumerable flavours, exciting genres, as well as a mouthwatering array of programming.

The medium, the message and the media – we have a major presence in each. We bring entertainment to people in 167 countries across the globe. We are the destination for seekers of ‘Indian flavoured’ entertainment as well as global programming. We appeal to the intellect, as well as the emotion. We deliver fact as well as fiction. Our eclectic programming range includes prime time drama series, reality shows, television movies, theatrical films, specials and daytime dramas, sports coverage, regional and international language based entertainment. We are here to provide the best in entertainment. We have made people recognise entertainment as Zee Entertainment.

We are Zee Network. With innovative shows, culturally relevant content, aesthetic presentation and a truly multi genre buffet of entertainment that suits every palate… …We are here to stay! and here Taking Entertainment Places Operational Review Governance & Financials 5

We were the first to be here. We are still the first choice of audiences in the Hindi GEC genre.

As a pioneer and the flagship channel of the group, Zee TV had a headstart in the Hindi Entertainment Channel business. It is a lead we have maintained over the past eighteen years, across continents. Zee TV is the first choice Hindi entertainment channel for the South Asian diaspora worldwide. Our popularity is a testimony to the consistent innovation and freshness we bring to our programming. From the very beginning we introduced a variety of programming like prime time drama series, television movies, theatrical films, specials and daytime dramas, each appealing to a segment of the audience. Even today our popular reality shows such as Sa Re Ga Ma Pa and Dance India Dance are redefining “entertainment” and connecting with audiences. For millions of people who love Hindi entertainment around the world… …We are here to sustain their interest! and here Taking Entertainment Places Operational Review Governance & Financials 7

Lights. Camera. Action. Roll. Edit. Release. Zeetelecast.

It is an ongoing festival of films everyday on ZEE Entertainment Cinema channels.

Zee is the one of the most favored home viewing channel for people seeking quality film entertainment. We have different cinema channels dedicated to specific genres such as - Zee Cinema, Zee Premier, Zee Action and Zee Classics. Together these channels cater to a variety of audiences, and it’s your own personal festival of films running on your TV. These channels command a sizeable lead in terms of eyeballs, over their nearest rivals.

With a variety of channels, some of the best and most loved old and new films, and an ever increasing viewership… …We are here to expand! and here Taking Entertainment Places Operational Review Governance & Financials 9

Namaste, Sat Sri Akal, Nomoshkar, Namaskar, Namaskara, Namaskaram Baagunnara.

Hindi, Punjabi, Bengali, Marathi, Kannada and Telugu – With our presence in these homes we celebrate the incredible diversity of cultures our country offers. Zee’s regional channels regale viewers with ethnically nuanced content, issues that are regional and entertainment that suits the specific taste of the region.

Our regional channel foray is a recent one with the merger of the regional channels into the ZEE Entertainment palette. With increasing audience loyalty, increasing share of eyeballs, and advertising spends... …We are here to grow! and here Taking Entertainment Places Operational Review Governance & Financials 11

Its love all for cricket and a sixer for tennis!

Be it cricket or tennis, football or motor racing, for millions of sports enthusiasts, viewing sport programming is the preferred genre of entertainment! ZEE caters to this avid sports loving community through its Ten Sports and Zee Sports transmission systems. Ten Sports is the leading sports channel for Asians and has retained its number one position since its launch. It is amongst the world’s leading producers and distributors of cricketing content and it owns the rights to broadcast games of half of the world’s popular cricket boards. The channel also has exclusive, long term broadcast rights for the UEFA Champions League, US Open Tennis, and WWE. The channel also broadcasts and distributes international football, cricket and motor sport content on behalf of various rights holders across the world.

With an exciting line up of sports programming, shot and edited in a manner to raise the feeling of being part of the event, we can safely say that in the sports genre… …We are here to win! and here Taking Entertainment Places Operational Review Governance & Financials 13

…and in USA, in Europe, in Middle East, Asia Pacific and Africa. In fact, we are almost everywhere.

We are here for the South Asian diaspora that is nostalgic of their homeland and hungry for culturally relevant entertainment. Zee reaches 500 million people across 167 countries and 5 continents. Zee has nurtured this multi ethnic, multi lingual audience since its early years through a variety of platforms.

Zee TV USA is the un-challenged leader in South Asian Entertainment across all Americas. Through its base in UK, Zee reaches 32 countries in Europe. Zee MENAP is the Zee arm that caters to audiences in Middle East, North Africa and Pakistan. It also caters to audiences in East and South Africa, as well as the Indian Ocean islands of Madagascar and Mauritius, as well as 43 countries in the Asia Pacific region.

Zee TV and the various ZEE channels deliver a taste of home culture and entertainment to the far from home, South Asian expatriate communities. For them… …We are here to relate! here and Taking Entertainment Places Operational Review Governance & Financials 15 Taking Entertainment Places where none others have been before…

…. and making Zee channels the destination to be for people seeking entertainment. Taking entertainment places is what we have Therefore, across every segment of the media value been doing ever since we began. It is unavoidable, chain ZEE have been instrumental in defining the especially when you consider that a pioneering spirit is shape of things to come. our second nature. Today, ZEE is a name synonymous with Satellite Zee Entertainment Enterprises Limited (ZEEL) is Television in India, with a presence spanning over not just the parent Organization of some of India’s 167 countries. But to us, that is only the beginning. most preferred entertainment brands. It is a also a Our organizational energies are focused on delivering trailblazing leader in the overall context of the media the next paradigm in entertainment and reaching out and entertainment industry in India. to a larger audience. Quite literally therefore, we are working on taking entertainment places.

Zee Entertainment is… Thus, across all the genres and verticals we operate in, … the first media Company to launch a Hindi General the underlying theme is that of consistent innovation. Entertainment Channel (GEC), before it became the largest genre … the first Indian media Company to list on a stock exchange, before the capital market became a preferred route for existing and newer entrants … the first to launch a 24 x 7 news channel, before round-the-clock news channels became the norm … the first to corporatise film making in India … the first to launch and manage an MSO on a pan- India basis 16 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Chairman’s Message

Subhash Chandra, Chairman

Dear Shareholders, During the last fiscal year, the Indian economy has done fairly well for itself. Despite the global financial crisis, India has been resilient and emerged as one of the fastest growing and one of the more stable economies of the world. I am positive about India’s growth story and the fact that India forms a vital component in the global economic health.

Countering the economic slowdown, 2009-10 has been a year of challenges and test of the fundamentals of our economy. I am impressed by the fact that as an economy, we have not only recovered from the recession, but also emerged stronger in all areas of development. Key indicators such as infrastructure development, surge in private equity transactions, flows from foreign institutional investors (FIIs) and conducive environment for the foreign direct investments (FDI) have all augured well for the Indian economy. I am delighted that as an Indian Company with a global outlook; your Company is also a part of this growth.

The GDP growth rate of 7.4 percent in 2009-10 surpassed the Government estimate of 7.2 percent for the full year. Government’s positive initiatives like private investment in agricultural sector, auction for 3G spectrum to enhance technology development, swift infrastructure development and creation of new consumption platforms in Retail, Banking, Financial Services and Insurance (BFSI) and Media & Entertainment (M&E) sectors have augmented growth. With 70 percent of India’s population based out of rural India, rural consumption has become an important constituent and further escalated growth. In addition to this, increase in domestic demand in manufacturing, industrial, FMCG sectors and further boost in advertising spends have stimulated the growth.

The sudden surge in disposable income has led to changes in consumer lifestyle and spending patterns, indirectly giving a boost to India’s consumption. Today, India stands as world’s second largest wireless network with over 500 million mobile users. Digital technology is advancing at an ever-increasing pace and the boom in technology is totally redefining the meaning of entertainment. The penetration of digital cable and DTH has augmented the growth in subscription revenues, while digitalization has opened a huge revenue opportunity for the M&E industry. Nearly 60 Taking Entertainment Places Operational Review Governance & Financials 17

Chairman’s Message MD & CEO’s Review Corporate Information

With unparalleled portfolios of programming properties, complemented by the distribution strengths from cable assets and reach of Pay TV, your Company is committed in creating operating efficiencies and developing new revenue sources for the long term.

per cent of C&S HHs are expected to be served by digital To entertain people, we need to have fresh, engaging and distribution by 2014. innovative programming. It is imperative that the industry encourages indigenous ideas and develops compelling With a CAGR of over 13 percent in the last few years, the content. Today the consumer is willing to pay more for M&E industry has played a vital role in the growth story of quality content, easy accessibility and comfort viewing. The the Indian economy. The advertising spend in India stood way forward is to imbibe technology changes and to create at 0.41 percent of GDP, as compared to world’s average leaders within the Organization, capable of tapping these of 0.80 percent. The figure clearly indicates that the M&E opportunities, like the roll-out of 3G technology. sector will form a major growth component of the nation’s economy. The overall M&E industry size grew at the rate of Today your Company is one of the foremost entertainment 1.4 percent, from INR 579 billion in 2008 to INR 587 billion brands in the country, entertaining audiences globally. in 2009. With over 70 percent share, Television and Print It gives me immense satisfaction to state that your have been two of the dominant mediums contributing to Company has been a consistent performer and delivered the total revenue of M&E industry. TV Advertising revenues a shareholder value CAGR of over 30 percent since witnesses a slowdown during the year 2010. While the inception. An able leadership team, creativity and sound growth rates have ranged upwards of 16 percent in the business strategies have helped us stay ahead in the previous year, last year television advertising revenues are competitive broadcast industry. estimated to have grown by only 1 percent. Your Company has a multi-genre offering and is living up The Television industry is estimated to reach Rs. 289 to its image of being a socially conscious network. Keeping billion in 2010 and is expected to grow at a CAGR of 15 the shareholders interest, the Organization is always trying percent over the next five years. The total TV households to improve internal processes and sharpening the focus increased 5 percent in 2009 to reach 130 million, while the on cash flows, which is a conscious decision to improve Cable & Satellite TV households increased at a faster rate earnings. With unparalleled portfolios of programming to reach 100 million. Going forward, the DTH subscriber properties, complemented by the distribution strengths base is estimated to cross 50 million by 2014. from cable assets and reach of Pay TV, your Company is committed in creating operating efficiencies and developing Currently, India is the third largest television market new revenue sources for the long term. in the world and despite the size; it is one of the fastest growing markets. TV penetration in India is currently only Sound principles of Corporate Governance are vital in the 58 percent and C&S TV penetration is 43 percent. The long term success of any Company and our endeavor is to consumption demand, fuelled by a steady growth in the maintain transparency and secure trust of our investors, Indian economy, would ensure a much greater number of employees, customers and public at large. Apart from this, television households. our commitment is to value the talent of each individual, thereby harnessing the strengths of a diverse work force. Today, India stands as world’s My fellow Directors and I would like to thank all our colleagues for their unrelenting dedication and hard work. second largest wireless network I would like to thank you, fellow shareholders, for your with over 500 million mobile users. interest in Zee’s progress and the faith you have in the future Digital technology is advancing at an of the Company. We will continue to make every effort to ever-increasing pace and the boom ensure that Zee remains a valuable investment for you. in technology is totally redefining the Subhash Chandra Chairman meaning of entertainment. 18 Zee Entertainment Enterprises Limited | Annual Report 2009-10

MD & CEO’s Review

Dear Shareholders, I am pleased to present the Annual Report to you all. It was a challenging year for all of us at the Company, yet we emerged stronger and bigger and more profitable. In a year when advertising revenues witnessed a dramatic slowdown, when competitive activity was intense, we managed to grow our marketshare and also improve our operating margins. Your Company’s foundation of leading brands, unmatched global footprints and a strong financial position has proven that we have the right fundamentals for growth even under challenging economic conditions. Our endeavour towards continuous innovation to stay ahead of the curve and seize opportunities has made us grow in strength.

Financial year 2009-2010 saw our flagship channel Zee TV reiterate its leadership position as we emerged as the highest viewed channel across television in India in the last week of June 2009 and enjoyed a strong leadership position year around.

A significant move this year was the acquisition of the Regional General Entertainment Channels (R GECs). With this your Company has strengthened its product fit as the R GECs offer Zee an opportunity to be part of the robust growth which the Indian regional market is witnessing. With the leading regional channels now in Zee’s fold the Company has unparalleled reach across the country. This move has also - Punit Goenka, MD & CEO

Zee Music becomes Zee TV - Pavitra Rishta Zee Café and Zee Studio Zee TV - SaReGaMaPa L’il ZING leads the prime time charts - win Gold at Promax Champs hosts LIVE Finale

April ‘09 May ‘09 June ‘09 October ‘09

&

Zee TV - now on Youtube Regional channels are Zee Talkies - hosts ZEE enters into JV with now a part of ZEE Maharashtra’s Favourite Mail.com for portal Kaun Awards www.india.com July ‘09 August ‘09 September ‘09 January ‘10 Taking Entertainment Places Operational Review Governance & Financials 19

MD & CEO’s Review Corporate Information Mission & Values

provided the Company an opportunity to take the regional This year, I am confident that our content-focused approach channels international and increase revenue streams further. combined with monetization on subscription revenues, especially from digital markets, will contribute to the Company As we continued to build our product portfolio for creating long delivering steady and attractive shareholder returns. We will term value, we acquired additional stake in Taj Television continue to strengthen our portfolio through investments in (India) Pvt. Ltd. (Taj India). Zee further strengthened its distinctive offerings and continue with the leadership trend in bouquet with the merger of ETC Networks Limited with the all our businesses. Company and the subsequent demerger of the Education Business into Zee Learn Limited. At Zee, we will continue to deliver our promise of giving joy to viewers as we grow with the support of our talented workforce. We also maintained our leadership position in the With this fundamental promise we look forward to the road international markets through relevant content, aggressive ahead and to make the best out of the substantial opportunities. marketing campaigns and fresh distribution tie ups across territories. As a result of the improved business environment and steady uptrend of ratings of all the Network’s channels, Yours Sincerely, the advertising revenue of the Company grew substantially. Punit Goenka MD & CEO The year gone by has given Zee tremendous growth opportunity to exploit synergies across the entertainment spectrum. The benefits would accrue because of more effective cross pollination of ideas. The Company’s commitment to its Achievements & Awards 2009-10 viewers of delivering high quality content across genres has translated into satisfactory financial results. Effies MENA Award Zee Aflam wins Gold Award for Marketing

FICCI Frames Most Successful Show of the Year award (Dance India Dance) Best Entertainer of the year, Television (Ulka Gupta of Jhansi ki Rani)

AP state Nandi TV Film Award Zee Telugu

Promax DDA Zing Ne Bana Di Jodi wins Gold Award Zee Talkies - ‘Natarang’ ZILS demerges from showcased at the ZEE International Film Festival Indian Telly Awards November ‘09 December ‘09 Best Dance Reality Show (Dance India Dance) Best Singing Talent Show (SaReGaMaPa) Most Popular Actress (Ratan Rajput) Best Historical Show (Jhansi ki Rani) Popular Supporting Actor (Female) (Savita Prabhune) Popular Actor - Negative Role (Sudesh Berry) Popular Fresh New Face Male (Avinash Sachdev)

Zee Conducts Rishtey Ten Sports telecasts Awards Hockey World Cup LIVE Zee TV’s Aap ki Anatara – adjudged as the best serial Sa Re Ga Ma Pa – completes 1000 episodes February ‘10 March ‘10 Corporate Information

BOARD OF DIRECTORS Subhash Chandra Chairman Laxmi Narain Goel Director Ashok Kurien Director Brijendra K Syngal Independent Director Nemichand S Jain Independent Director Rajan Jetley Independent Director Sir Gulam K Noon Independent Director Dr Mohammed Y Khan Independent Director Prof R Vaidyanathan Independent Director Punit Goenka Managing Director & Chief Executive Officer

SENIOR MANAGEMENT AUDITORS Amitabh Kumar Technology M/s MGB & Co. Atul Das Corporate Strategy & Business Development Atul Pande Sports Bharat Ranga International Operations COMPANY SECRETARY Dr Rajesh Save Human Resources M Lakshminarayanan Hitesh Vakil Finance Joy Chakraborty Domestic Revenue & Niche Channels BANKERS Nitin Vaidya Content - National & Regional HSM Roland Landers Corporate Brand Development Axis Bank Ltd. BNP Paribas Yes Bank Ltd. ING Vysya Bank Ltd. Standard Chartered Bank

REGISTERED OFFICE Continental Building, 135, Dr. Annie Besant Road, Worli, Mumbai - 400 018. Maharashtra, India. www.zeetelevision.com Taking Entertainment Places Operational Review Governance & Financials 21

Corporate Information Mission & Values Financial Highlights

Mission To be the leading round the clock airtime properties provider and delight the viewers not only through our general entertainment and infotainment channels, but also through quality cinema from our movie banners.

As a Corporation, we will be profitable, productive, creative, trendsetting and financially sound with care and concern for all our viewers and stakeholders namely advertisers, cable operators, producers and production houses.

Values

Customer Focus Our Company’s strategies are driven by the needs of the customer. Our success can be measured by the satisfaction achieved by our customers.

Excellence We accord a high premium to maintaining superlative standards throughout our Company. We encourage our employees to come up with smarter ideas within the fastest possible time.

Creativity Key to our value system is innovation and originality. We recognise and have a high regard for individual expression and creative freedom in our quest to provide customer satisfaction.

Integrity We observe strict ethical standards through editorial independence and creative expression, in order to earn the trust of our viewers and subscribers.

Growth Driven We are committed to delivering consistent revenue and cash flow growth in order to provide our shareholders a good return. Our objective is to grow our people, market and businesses around the world. 22 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Financial Highlights

Consolidated

Revenue Profile

2009-10 2008-09

7% 10%

49% 45% 49% 42%

Advertising Subscription Other Sales & Services

Cost Break Down

2009-10 2008-09

15% 16%

13% 11% 60% 60%

12% 12%

Operational Cost Personal Cost Administrative Expenses Selling & Distribution Expenses Taking Entertainment Places Operational Review Governance & Financials 23

Financial Highlights Operational Highlights Zee - The 5 Minute Read

Income from Operations (Rs. in million) CAGR ‘10 21,998 7.38% ‘09 21,773 ‘08 18,354 ‘07 15,159

‘06 16,543

Total Expenses (Rs. in million) Profit before Tax & Exceptional Items (Rs. in million) CAGR ‘10 15,863 CAGR ‘10 6,738 3.45% ‘09 16,293 24.69% ‘09 5,403 ‘08 12,931 ‘08 5,813 ‘07 11,955 ‘07 3,432

‘06 13,848 ‘06 2,787

Operating Profit (Rs. in million) Profit after Tax (Rs. in million) CAGR ‘10 6,135 CAGR ‘10 6,344 28% 27% 22.83% ‘09 5,480 31.17% ‘09 5,124 25% 22% ‘08 5,423 ‘08 3,832 Operating Profit Profit after Tax 30% 20% % of Income % of Total from Operations ‘07 3,204 Income ‘07 2,375 21% 15% ‘06 2,695 ‘06 2,143 16% 12%

Dividend (Rs. in million) Market Capitalization (Rs. in million) CAGR ‘10 1,947 CAGR ‘10 131,356 22.54% ‘09 868 7.50% ‘09 46,157 ‘08 868 ‘08 106,072 ‘07 650 ‘07 108,674

‘06 435 ‘06 98,372 24 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Operational Highlights

Zee Telugu No. 1 in Non-Fiction, Prime Time Band and Morning Band

35%Zee Marathi’s Relative Share In Maharashtra Market

Zee Marathi has the highest viewership in Maharashtra market (Viewers in Million)

Zee Marathi 14.8

ETV Marathi 13.6 Star Pravah 11.5

Source: TAM Peoplemeter, CS4+ Yrs, All Mah, Apr 2009 till Mar 2010

Starting at 11% in April ’09, Zee Kannada’s relative Non-Fiction GRPs and Relative Share (%) of GECs share grew to 15% among the five Kannada GECs

168 Zee Telugu 32% 18% Suvarna 97 Gemini 18% 130 8% Kasturi Eenadu TV 25% 40% Udaya TV 133 Maa Telugu 25% 15% Zee Kannada

GRPs Rel. Share (%) of GECs 19% ETV Kannada

Source: TAM Source: TAM, Kannada GECs, CS 4+ Yrs, Karnataka Taking Entertainment Places Operational Review Governance & Financials 25

Operational Highlights Zee - The 5 Minute Read Business Division Summary

Zee Cinema No. 1 Hindi Movie Channel in FY 09-10

Zee TV has 53% South Asian viewership in USA

Zee Cinema GRPs in FY 09-10 : Hindi Movie Channel

Zee Cinema 143

Max (excl. IPL) 140 Star Gold 97

UTV Movies 39

Filmy 26

Source: TAM Peoplemeter System, HSM; C&S4+; Max data is excluding IPL ratings

No.1 channel - 18 months in a row in Hindi GEC Ten Sports Network Share 26%

GRPs and Reach in FY 09-10 in U.A.E. markets 0% Neo Sports Zee TV 121 25% Ten Sports 23% 36% Neo Cricket Star Plus 105 1% Zee Sports 22% 1% DD Sports

Sony 70 5% Star Sports 27% Star Cricket 14% 5% ESPN

GRPs Reach Source: IPSOS, March 2010 Source: TAM; TG: CS M 15+; Market: All India; Target Group: Indians, Pakistanis, Bangladeshis, Sri Lankans Period: 1st Apr’09-31st Mar’10 26 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Zee - The 5 Minute Read

Who can entertain 500 million viewers across 167 countries of the globe in a sustained manner over a period of 18 years? Zee Entertainment Enterprises Ltd. We are here to entertain. Zee Entertainment has achieved this geographical spread and share of eyeballs through constant evolution, continued alignment with changing tastes and audience expectations, investment in new technology platforms and creation as well as aggregation of content.

THE FRONTRUNNER Zee’s education venture ZICA (Zee Institute of Creative Arts) Zee Entertainment is India’s leading television, media and bagged a nomination in the fourth China International Student entertainment Company and amongst the world’s largest Animation Festival for an animated movie – ‘Education Bazaar’. producers and aggregators of Hindi programming, with an Zee is the only media Company to feature in the ‘Super 100’ extensive library, housing over 80,000 hours of television companies listed under Business India. content across 30 channels. Mobile Gaming from Zee Cinema Successful programming and marketing initiatives have Zee Cinema became the first ever Hindi movie channel to enabled us to position ourselves as a strong brand with a robust launch mobile gaming. Zee Cinema offered its viewers an 20% market share. We are also the largest entertainment opportunity to auction celebrity costumes and 50 per cent of businesses serving the expatriate South Asian community the proceeds were donated towards charity. Zee Cinema had across the world delivering an interesting mix of programming 47 movies in top 100 programmes across the movie genre. across genres. Sporting Action Business restructuring Zee Sports broadcasted the prestigious ABN AMRO Men’s Zee Entertainment’s initiatives to restructure its business Champions Trophy while Ten Sports showcased live telecast portfolio and acquire the Regional GEC business will ensure of the 2 week long US Open 09, both premier sports events greater consolidation and synergies and result in better value with high viewership. creation. International Alliance Consistent network performance Zee Africa tied up with channel partner CANAL+, a leading On the viewership ratings front, Zee TV peaked at 281 GRPs French television channel. in the third week of August, 2009. Zee TV also outshined all competition at the 9th Indian Telly Awards 2009 and won a Best of English content record 9 awards. Zee Aflam, Zee Network’s Bollywood channel Zee Café brought the latest seasons of some of the most packaged in Arabic for the Arab community won the gold award popular TV series and also telecast the Emmy Awards 2009 at the prestigious Efflies MENA Awards for Marketing in ‘Media/ live. On the other hand, Zee Studio enriched its library with 18 Content/Internet Provider category. Zee TV also celebrated sparkling satellite premieres continuing its trend of bringing its golden moments with ‘Zee Rishtey Awards 2010’, where stimulating movie experiences into the viewer’s living room. viewers got an opportunity to meet their favourite stars. Zee Café won the prestigious 35th People’s Choice Awards.

Hindi General Regional General Bollywood Sports Entertainment Channels Entertainment Channels

Zee TV Zee Marathi Zee Cinema Zee Sports Zee Smile Zee Bangla Zee Premier Ten Sports 9X Zee Talkies Zee Action Zee Kannada Zee Classic Zee Telugu ETC Punjabi Taking Entertainment Places Operational Review Governance & Financials 27

Zee - The 5 Minute Read Business Division Summary Our People

Moto GP Dadagiri Unlimited Pavitra Rishta Movie - Fashion

Alladin Parvathi Parmeshwara

Focus on new media Zee Entertainment Enterprises entered into a joint venture with Mail.com Media Corporation (MMC), a leading digital media Company based in Los Angeles, USA in February, 2010. This JV marks the launch of an online and mobile entertainment portal. The new content-centric portal will offer users a broad range of exciting entertainment viewing options and other leading portal applications.

International English Entertainment Music Alternate Lifestyle Presence

Zee Cafe Zing Zee Jagran 167 Countries Zee Trendz ETC Zee Salaam 500 Million Viewers Zee Studio 19 Beams International 28 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Business Division Summary

Hindi GEC ZEE Entertainment’s Hindi General Entertainment vertical is an integrated monolith that includes the largest library of Hindi programming in the world, the largest MSO operation in India reaching an approximate 95 million households in India, and one of the largest Indian multi distribution platforms in the world. The Hindi GEC reaches audiences in countries including USA, Canada, Europe, Africa, the Middle East, South East Asia, Australia and New Zealand. Zee has emerged as one of the most popular brand within a decade of its launch.

Zee Tv www.zeetv.com The unique taste of Hindi entertainment

Zee TV is the flagship channel of the Zee Network and its most recognised and welcomed face. Launched in October of 1992, its continuing global popularity is a testimony to its intelligent and audience friendly programming across different segments. With its strong brand equity it is the largest media franchise serving the South Asian diaspora.

During the year in review, Zee TV continued its path breaking innovation in its programming. Several of its new programmes including Agle Janam Mohe Bitiya Hi Kijo, Pavitra Rishta and Jhansi ki Rani became big hits with the audiences and established new benchmarks Highlights 2009-10 in broadcasting. Zee TV’s home grown brands of Sa Re Ga Ma Pa and Dance India Dance scaled greater Consistent leadership heights when 76,000 number of people participated in Pavitra Rishta remained a leading daily soap across Hindi the auditions of these shows. By delivering a wide variety GECs during the course of the year; Lil Champs and Dance of entertaining programmes across genres, the channel India Dance topped the non-fiction charts; The 7 TVR of lived up to its tag line of - ‘Har Pal Banaye Ek Naya Rishta’ ZEE Rishtay Awards, has been the highest that any event (make new relationships every moment). Zee reiterated has witnessed in 2009-10 against stiff competition. Zee’s its leadership position and reaffirmed its commitment to shows dominated the top 50 charts most of the year. innovative content, high quality entertainment and novel Zee has once again managed to retain its edge across programming in keeping with changing tastes. programme formats, and audience categories. Taking Entertainment Places Operational Review Governance & Financials 29

Business Division Summary Our People

zee smile Dedicated to the lighter vein Zee Smile is a free-to-air entertainment channel that broadcasts original content, some of which is also shown on Zee TV. It’s attracts a huge viewership thanks to its free to air access. Zee Smile is focused on fun and comedy and it airs daily soaps, game shows, comedy chat shows, and comedy movies. Most of the programming on this channel showcases the lighter side of life. As a free to air channel, it is widely viewed and is a favorite of family audiences.

Close to 36000 kids About 40,000 people were auditioned for got auditioned for Dance India Dance Dance India Dance 2 Lil Masters. across the globe.

Pavitra Rishta has been Jhansi ki Rani - amongst Top 5 Best Entertainer of since launch. the year.

Smart casting During the time when every other channel brought programmes with star power to attract audiences, Zee TV acted as a contrarian and yet retained and grew its www.9xtv.in viewership. It accomplished this by smart casting - to 9X create a freshness in offering as well as achieving cost optimization. A good example in this context are Afsha and Growing inorganically Dhrirya; the hosts of Lil Champs who went on to become ZEE Entertainment further consolidated its position in the celebrities in their own right. Such initiatives have resulted Hindi GEC segment by acquiring the 9X Channel Business in Zee TV truly reaching to the masses and making stars from 9X Media Pvt. Ltd. out of common people. 30 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Business Division Summary

cinema The Indian film industry is accepted as the most prolific in the world, and Indian audiences are avid film lovers.

Zee Entertainment’s Hindi movie channels, Zee Cinema, Zee Premier, Zee Action and Zee Classic deliver the best of bollywood films and film based entertainment to the audience. Zee Entertainment’s cinema channels have been leaders in the genre with a major pie of the market share.

Zee cinema www.zeecinema.com ZEE entertainment’s Cinema bonanza - now showcased in living rooms across India

Zee Cinema, India’s first 24 hours Hindi movies channel is the home of bollywood movies and one of the most viewed film channels in the country. Its vast viewership is a reflection of the channel’s ability to consistently listen, understand, respond proactively, meet and exceed the changing audience expectations.

For its viewers, Zee Cinema strives to be - More Movies. More Masti. More Magic. Taking Entertainment Places Operational Review Governance & Financials 31

Business Division Summary Our People

Zee Cinema was India’s first 24x7 cinema channel and it revolutionised the film industry by bringing bollywood entertainment to the living rooms of its fans. The channel has a vast collection of bollywood hits starring the top talents of the industry which it showcases in themed series such as Shanivar ki Raat, Amitabh ke Saath, (Saturday Night with Amitabh) and Showman’s Show (featuring films of leading Directors), Dopahar Zee Cinema Par, Lady’s Raaj (specially designed for the women audience) and Mohe Mithunda se Milwade to name a few.

In order to bring the Masti element of bollywood entertainment, Zee Cinema initially began “Buzz of the Week” where leading superstars spoke to the audiences about their films that are shortly to be released.

Zee Cinema has also extended the magic of cinema to a Highlights 2009-10 new and emerging media by creating India’s first mobile Zee Cinema continued to meet its profit targets during game - Cinema Ka Baadshah. the year. It also retained its position as the leading Hindi With Zee Cinema’s robust distribution network spread Movie Channel. The channel has commissioned a new across India, it enjoys the distinction of being the look that is slated for launch in 2010-11. A path breaking country’s first pay channel. Over the years the channel’s initiative that the channel began is Bid for Bollywood – an sprucing up premiers and specials with exclusive content initiative to bid for original costumes of the biggest Indian have been widely appreciated. film stars. 32 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Business Division Summary

Zee Premier Home box office for Bollywood Blockbusters Zee Premier is a 24 hour movie channel that features some of the latest films from bollywood. It enables movie buffs, and cinema addicts to feast on a collection of exclusive entertainment and art value content. The collection also features the world television premiere of many award winning movies such as Taare Zameen Par, Dhool, Dhammal, Jodha Akbar and Race. Zee Premier appeals to the “young at heart” section of the populace.

Zee classic Zee Action Not just the old, but the Lights, Camera and Action of a golden oldies different kind

Zee Classic is the home to the ‘blast from the past’ – and Zee Action caters to the millions of lovers of Action films. it airs films from its outstanding library of Indian cinematic The channel has a collection of hundreds of action films classics. It is the most popular channel after Zee Cinema. made over the past three decades. The channel has The channel airs many classics from the black and white regaled action lovers with blockbusters such as Ghayal, era, films that are difficult to access otherwise. The focused Ghatak, Tahalka, Elan-e-Jung, Phool aur Kaante, Apradh channel revives magic moments of the yesteryears by and Qurbani. Themed action entertainment like Teen Ka airing old block busters and classic cinema. Tashan have brought alive the magic of action movies into the living rooms and created a special experience crafted only on Zee Action. Taking Entertainment Places Operational Review Governance & Financials 33

Business Division Summary Our People

Alternate Lifestyle The stress and demands of the modern materialistic lifestyles are prompting people to turn to spirituality and religion for some solace. People find refuge and a safe haven in the eternal wisdom and teachings of religion. Regular prayers and meditation is the accepted way across India to enhance Quality of Life. Zee Entertainment’s alternate lifestyle genre aims to expose people to the spiritual and religious side of life.

Zee jagran www.zeejagran.com Reawakening the spiritual soul Zee Jagran is slotted in the spiritual and religious entertainment genre. It aims to awaken and enrich the lives of people by helping them realise the innate spiritual aspects of their life. This lifestyle channel provides holistic entertainment to the audience through alternate lifestyle programmes, interactive astro-solutions, spiritual content and mythological and socially relevant movies and serials. The 24 hour socio- spiritual channel is far ahead of its competition in terms of its capabilities in content creation and the standard of its offerings. Zee Jagran is a 24 hour socio-spiritual channel which provides holistic entertainment to the audience through alternate lifestyle programmes.

Zee Salaam Urdu Infotainment Zee Salaam, the Urdu infotainment channel dedicated to Urdu language and Muslim Culture was launched by Zee Network in the month of February this year. This channel offers an array of purely religious, semi-religious and light hearted programmes. Since its inception the channel has been embraced with open arms by connoisseurs and normal viewers, alike. So far, it is been the only channel in the genre that got permission to showcase the Ajmer URS Sharif festival live for all the six days in June.

The content offering of the channel is a quality line up of programmes, which provides education, lifestyle, family entertainment, travel show, historical documentaries, Sufi wisdom, kids programmes, Maghrib & Isha prayers, community updates, legal talks, legacies of Islam and more. It is a broad mix of religion, serials and musicals. 34 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Business Division Summary

sports Zee Entertainment holds a majority stake in Ten Sports and also owns - ZEE Sports. On Ten Sports, WWE and cricket are the main drivers of content; whereas ZEE Sports is the home of Indian and International football. It also telecasts the UEFA Champions League. Together, the two channels deliver a rich mix of sports content and they command a significant market share.

ten sports www.tensports.com

Ten Sports was launched on April 01, 2002 by Taj Highlights 2009-10 Television Company, a full-service television concern, The channel kept sports lovers glued to their television based in Dubai Media City having eight regional offices sets with exciting games such as the 4 match ODI series across the sub-continent. Taj Television (India) Pvt. Ltd v/s West Indies, The Compaq Cup, The Hockey World is a wholly-owned subsidiary of Zee Entertainment and Cup 2010 and the UEFA Champions Trophy. It also the exclusive distributor of the Ten Sports channel to featured the US Tennis Open, the Tour de France and cable operators in India. the Moto GP 2009. Ten Sports transmits three localised beams which are compliant to all DTH platforms, and the channel is available in more than 75 million homes in over 75 territories. 126 days Today, Ten Sports is Asia’s leading sports channel, that of Live commands a 60% share in the genre in India; and the pattern is repeated across the region. Since its launch in 2002, the channel has emerged as one of the World’s International leading producers and distributors of live cricket. Ten Sports owns the commercial rights to broadcast games Cricket from of half of the world’s cricket boards, including the West Indies, Pakistan, Sri Lanka, South Africa, and Zimbabwe. across the Other exclusive and long-term broadcast rights it owns includes rights to the UEFA Champions League, US world Open Tennis and WWE. Taking Entertainment Places Operational Review Governance & Financials 35

Business Division Summary Our People

zee sports www.zeesports.com International sporting events for the Indian sports lover, Indian sports events for the international audience. Zee Sports is India’s first privately owned sports channel and was launched in the year 2005. In the five years since its inception the channel has evolved into one of the biggest forces in sports entertainment genre for Indian audiences.

Zee Sports showcased some of the most popular cricketing events featuring powerful teams such as - Pakistan, Sri Lanka and Zimbabwe. Broadcasting events such as the WWE have made wrestlers like Khalli, a superhero in India and a superstar abroad. Besides, the channel showcases a variety of adventure sports programming.

Highlights 2009-10

During the year, Zee Sports broadcasted the Nehru Cup games, The Federation Cup, The I-League and Santosh Trophy games.

Indian Team in ODI series Hockey World Cup UEFA Champions League 36 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Business Division Summary

Regional GEC

The Regional channels of Zee Entertainment address the culturally and linguistically diverse Indian audiences and delivers culturally nuanced programming across genres. Zee Entertainment popular regional channels like Zee Marathi, Zee Bangla, Zee Telugu, Zee Kannada and ETC Punjabi give it unparalleled reach and depth across regional markets.

Zee Marathi www.zeemarathi.com

“Mee Marathi Zee Marathi” Zee Marathi was launched in 1999 as the quintessential entertainment channel for the culturally rich Marathi audience.

Today it is one of the biggest regional offerings of the Network.

The channel has made its mark among Maharashtrians across the world with trend setting shows like Avantika, Wadalavaat, Gandhar Tipre, Ya Sukhano Ya and Hafta Bandh. These shows have created a strong channel identity and brand association in the minds of the audience.

During the year, Zee Marathi continued its dominance in the Maharashtra market delivering 201 weekly GRPs on an average. It attained a channel share of 42% in its genre. The channel has a nearly 90% lead against its nearest competitor. It broadcasts an eclectic mix of fiction, reality, events and movies in prime time. It’s Zee Marathi has innovative programming mix such as the hugely popular Kumku and its fictional a nearly 90% lead dailies BhagyaLaxmi and Mazhiya Priyala Preet Kalena have helped it retain against its nearest audience interest and eyeballs. Its stand-up comedy show Foo Bai Foo is the top competitor. rated show on the channel. The dominance of the channel is such that 48 of the top 50 rated shows belong to Zee Marathi. It broadcasts an eclectic mix of fiction, In an important development, ‘Natarang’ – the film which had its world premiere reality, events and on the channel garnered 7.3 TVR (C&S 4+ All Maharashtra). This film was a Zee Talkies home production. The film is not only the biggest blockbuster but also the movies in primetime. most critically acclaimed films of all time internationally. Taking Entertainment Places Operational Review Governance & Financials 37

Business Division Summary Our People 38 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Business Division Summary

Movie ‘Natarang’ Zee Talkies www.zeetalkies.tv

Maharashtracha Mahacinema Zee Talkies, was launched in 2007 as India’s first 24 hour Marathi film channel. It showcases movies, movie stars, music and everything to do with Marathi movies. The channel has the largest library of Marathi film masterpieces. Zee Talkies is the only movie channel that airs 5 original movies a day! Zee Talkies has delivered an average of 52 GRPs in the first quarter of the year in review. This top rating in popularity comes on the back of audience favorites such as Saturday Housefull, Shaniwaar Funniwaar, Mahacinema and Sunday Superhit.

Zee Talkies also airs the much talked about Talkies Zee Talkies Box office which deliver’s updates about new Marathi has the largest releases and box office results. The channel has topped library of Marathi charts with the premiere of Nishane Dava Angatha, Ashi hi Banva Banvi, Laagnachi Vaarat Londoncha Gharaat films. It is the and Checkmate. only movie channel that airs 5 original movies a day! Taking Entertainment Places Operational Review Governance & Financials 39

Business Division Summary Our People

Khona Dadagiri Unlimited Agnipariksha Devdas Zee bangla www.zeebangla.com

Jibon Maane Zee Bangla With a tag line that reads as - Zee Bangla is a reflection of life, the channel aims to meet the aspirations of the Bengali diaspora for entertainment with uniquely Bengali sensibilities. The channel was initially launched as Alpha Bangla in 1999 and was later rechristened Zee Bangla. The channel endeavours to remain connected to viewers’ lives throughout the year – be it International Women’s Day, Holi, Durga Pujo, Diwali or through promoting viewpoints on relevant topics such as Violence against Women. The channel has a library of over 9,000 hours of Bangla entertainment and has rights to over 600 Bengali films.

Zee Bangla hosted an eclectic mix of programming Zee Bangla has a including mythological, family dramas, classics like Sarat Chandra Chattopadhyay’s Devdas as well library of over 9,000 as the famous dance reality show Dance Bangla hours of Bangla Dance which was hosted by famous superstar Mithun entertainment and Chakraborty and Dadagiri Unlimited, a sports based has rights to over quiz programme chaired by non other than cricketing 600 Bengali films. great Sourav Ganguly. The channel was revamped and launched with a new packaging on October 2009. 40 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Business Division Summary

Aata Juniors Magadheera Bhakthi Samachaaram

Zee Telugu www.zeetelugu.com Sarikotha Velugu… (Truly a New Light!) Zee Telugu is the first south based regional channel from the Zee family. Within just five years of inception, the channel has soared high on popularity charts and proven how creative ideas, constant innovation and a feel for popular taste can usher in a radical change in viewership patterns.

The range of programmes include devotional, music, dance, comedy and blockbuster movies as well as reality shows. A strong contender for the leadership spot in Telugu GEC, Zee Telugu is striving to further consolidate its position. Its programming includes Sa Re Ga Ma Pa – a talent show The range of programmes for singers, a dance competition – Aata and Mee Inti Vanta – a cooking include devotional, programme showcasing the best culinary talent from the state. music, dance, comedy During the financial year 2009-10, the programmeSa Re Ga Ma Pa received and blockbuster movies the prestigious Nandi Award from the Andhra Pradesh state Government, a as well as reality shows. first time honour for Zee Telugu.Aata , emerged as the number one programme A strong contender for on Andhra Pradesh GEC channels, and it beat all serials and feature films in the leadership spot in the week not merely once but four times in the year with average rating of 9 Telugu GEC, Zee Telugu TVR. In the fiction category the channel registered an 18 per cent growth rate over the previous year. The last two quarters of the financial year witnessed is striving to further healthy performances. For the first time since its inception, Zee Telugu consolidate its position. reached its highest GRPs of 474. (Source: TAM, Wk 23 2009-10). Taking Entertainment Places Operational Review Governance & Financials 41

Business Division Summary Our People

Zee Kannada www.zeekannadatv.com Kannadiga Kanmani… (Truly means Pride of Kannadiga!) Zee Kannada is the second south Indian regional channel of the Zee Network. It caters to the Kannadiga speaking audiences nationally.

Zee Kannada was created with a vision to provide wholesome family entertainment. The channel’s programming is a rich mix including devotional content, music, dance, comedy and blockbuster movies as well as reality shows. Within three years of its inception, the channel soared high on the popularity charts with conventional and non-conventional creative ideas and continuous innovation, which changed the viewership pattern of the Kannada audience. The channel enjoys a strong number two position in Kannada GEC Genre.

Zee Kannada’s fiction shows reached 50 GRPs, up from 13 GRPs in the beginning of April 2009. This dramatic improvement in viewership came about thanks to the strong programming and content that included stellar programmes like the serial Jogula, Panduranga Vittala the sitcom Parvathi Parameshwara and the talk show Baduku Jataka Bandi. The channel achieved a relative share of 15 per cent, up from 11 per cent in April 2009 among the five Kannada GECs. (Source: TAM, Market: Total (Karnataka), TG: CS 4+ All SEC).

Zee Kannada’s programming is an rich mix including devotional content, music, dance, comedy and blockbuster movies as well as reality shows.

RuchiAbhiruchi Athe Sose

Rock n Roll Jogula 42 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Business Division Summary

ETC channel Punjabi has been the global leader amongst Punjabi general entertainment channels. Its entertainment quotient is a compelling mix of programming, music and religious content, striking an emotional connect with its audiences.

ETC Punjabi

Since inception, ETC channel Punjabi has been the global leader amongst Punjabi general entertainment channels. It’s entertainment quotient is a compelling mix of programming, music and religious content, striking an emotional connect with its audiences. The next challenge for the channel is to stay ahead of the curve by virtue of innovative content, strategic planning and investment to generate higher domestic and international viewership and garner more revenues.

Highlights 2009-10

ETC Punjabi continued to offer new and unique genres of programmes to its viewers that include the innovative game show - Garma Garam Dus Hazaar. A talent show for children - Nikke Nikke Hasse. ETC Punjabi also initiated a one-stop helpline programme for women called Main Ki Karaan in addition to a non-stop hilarious stand-up comedy show titled Laughter House and Sorry Paaji. The channel replaced had initiated an immensely popular religious platform of melodious hymns from Gurbani - Sun Sun Jeevan Teri Bani. The programming initiatives received an overwhelming viewer response, including weekly campus fun frenzy - Masti Da Funda, Tadka Punjab Da and Café Bollywood.

In the coming few months ETC Punjabi will complement its current portfolio by launching a first-of-its-kind daily soap Akhiyan Ton Door Jayeen Na for the Punjabi speaking audiences, and launching a new travel show that shall explore all historically significant villages of Punjab.

Nikke Nikke Hasse Taking Entertainment Places Operational Review Governance & Financials 43

Business Division Summary Our People

Business Division Summary

International presence With its launch in the UK in 1996, Zee TV became the first Indian broadcaster to go International. The network has today made its presence felt across 167 countries, entertaining a diverse audience of 500 million viewers. The leading regions to which Zee Entertainment reaches out to are USA, Europe, Middle East (MENAP), Asia Pacific and Africa.

Zee Entertainment has been delighting viewers across the globe since the past 14 years. The international markets have dedicated business teams keeping a tab on the pulse of the region and offering viewers with customised offerings. The regions of Americas, UK, Russia, Middle East, Malaysia, Indonesia and Africa have our channels entertaining not only the South Asian diaspora but have also become a favourite amongst the nationals.

Each passing year has seen the channels grow from strength to strength with the introduction of newer channels and innovative programming concepts. A recent one being the launch of Zee Aflam in the MENAP region. The channel has occupied a strong leadership position since its launch almost two years ago. Another significant recent move was in the UK region where Zee Cinema became a standalone option.

The initiatives taken by Zee Entertainment in the International arena have cemented our ties with our audience. As a result of the tremendous response the channels have received, localised programming has been introduced in many other regions.

Being a pioneer in the South Asian market, Zee Entertainment enjoys the first mover advantage. The niche channel offerings and the strong tie-ups with leading distribution platforms gives the network a formidable stance. The strong library of content is dubbed or subtitled for specific markets and this has been met with significant success.

In addition to the programming initiatives, International subscription is a key contributor to Zee Entertainment’s revenues for the financial year 2009-10. 44 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Business Division Summary

music Music has always been a vital and integral aspect of Indian culture. India has a rich and varied tradition of music including Hindustani and Carnatic classical music, devotional, popular bollywood music and remixes. Today Zee Entertainment has expanded its offerings in the music genre by launching ETC and Zing. These channels are market leaders in their respective niche genres and provide viewers with lively, entertaining music that connects people to their rich cultures and traditions.

Zing www.zingtv.in Music was rebranded as Zing in 2009, the channel has truly identified itself with bollywood and lifestyle. Zing has explored non-music programming with reality TV programmes like Anchor Hunt, Zing Ne Bana Di Jodi and various other bollywood centric shows on air. The year 2009-10 witnessed an increase in revenues by almost 50 per cent. The channel differentiated itself by offering advertisers unique innovations, beyond mere FCT. Zing’s programme content is aimed at an audience in the 15+ years, SEC A, B and C.

Going ahead, Zing will focus more on bollywood specific programming by offering a mix of music, movies and bollywood-centric shows. Taking Entertainment Places Operational Review Governance & Financials 45

Business Division Summary Our People

ETC will showcase for the first time, the voices and opinions of viewers on a regular basis. It will thus create a unique one-stop-shop for the business of bollywood.

ETC www.etc.in

ETC, India’s only bollywood trade channel, has successfully positioned itself in the world of business and entertainment. The channel’s programme content targets the 15+ age group in the SEC A, B and C categories. The channel airs vignette formats like Box Office Collections, Top 10 grossers of the year, movie calendar, Top 10 songs of the week, and movie meter which are exclusively done for the Bollywood Trade. Other prime shows on the channel include ETC Bollywood Business, Hot Shot, ETC Xtras and ETC Super Star, among others.

The year 2009-10 augured well for the channel, despite a multiplex-producer strike during the first quarter. ETC took the initiative of getting the producers and multiplex owners together to voice their issues during the strike period. ETC has also partnered in the Anti Piracy initiative drive along with several top Film Production companies.

Going ahead, ETC will showcase for the first time, the voices and opinions of viewers on a regular basis. It will thus create a unique one-stop-shop for the business of bollywood. 46 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Business Division Summary

English Content Zee Entertainment’s English channels cater diverse genres including Movies, Fashion, Music, and Entertainment. The premium channels of the network - Zee Cafe, Zee Studio and Zee Trendz telecast the finest English content sourced from some of the leading studios across the globe. The channels are popular among the affluent (higher SEC) segment of the television viewing audiences of India. These entertainment channels have an extensive library comprising of a mix of award- winning films and block buster movies, and they feature seasons of some of the top rated International shows. The channels also feature live telecasts of some of the most spectacular and sought after world events.

Zee Cafe www.cafecrazee.com International programming for the Indian audience Launched in March 2000, Zee Café is one of the most widely viewed English channel in India. The channel has always focused on sourcing the best international content, appealing to the young, urban Indian palate. The channel’s programming ranges from popular sitcoms to reality series, live concerts, and stand- up comedy acts. The most popular shows on the channel include F.R.I.E.N.D.S, Gossip Girl, Sex and The City, The Tonight Show, Grey’s Anatomy, AFV, Americas Next Top Model, Survivor and the only Indian show capturing all the exciting party action, After Hrs. Zee Café endeavors’ to bring the latest shows of American television to Indian audiences.

Highlights 2009-10

In August 2009, the channel launched India’s first combination of talent hunt and a game show Café Mic Testing, a unique reality show that searches for the next voice of Zee Café. In a bid to preserve topicality, Zee Café telecasts E! News and The Tonight Show with Jay Leno within a mere 12 hours of its USA telecast. The channel broadcast included the World Music Awards, Emmy’s and leading fashion shows. Zee Café also acquired the exclusive LIVE telecast rights to the most prestigious international beauty pageant- Miss World 2008 and 2009. The channel also broadcast the most coveted award that recognises women’s excellence and achievements, - The Women’s World Awards 2009. Stepping beyond the realms of a regular television channel, Zee Café’s initiative of ‘Green turn’ (a drive for a greener earth) has found an enthusiastic response, Gary Unmarried right from viewers to advertising partners. Taking Entertainment Places Operational Review Governance & Financials 47

Business Division Summary Our People

The Bold And The Beautiful Zee Trendz www.zeetrendz.tv India’s leading fashion and lifestyle franchise Zee Trendz brings superlative content related to avant garde style, fashion, music and people. The channel has featured almost every major fashion event held in India, including Lakme Fashion Week in Mumbai and Wills India Fashion Week in Delhi. The channel’s Fashion Scoops offers weekly updates on the events and happenings in the world of fashion. Zee Trendz programming is a mix of Indian Fashion content and English music. The channel will strengthen its position in the fashion and lifestyle segment.

Pirates of the Caribbean: Serendipity Dead Man’s Chest

Zee studio www.zeedio.tv 24X7 English movie channel like Vicky Cristina Barcelona, The Wrestler and Fireflies Zee Studio was launched in March 2000. The channel in the Garden, among others. is passionately focused on delivering quality cinema to the discerning Indian audiences. Zee Studio’s library is a The channel has also acquired the exclusive telecast potent mix of Hollywood’s hottest blockbusters, animation rights to prestigious awards ceremonies such as The flicks, golden classics, musicals, comedies and the finest Screen Actors Guild Awards 2009 and Live from the Red of world cinema. Carpet: Academy Awards 2009. The channel’s original production Get Shorty also gave budding film makers an Zee Studio’s rich library of films include blockbuster titles opportunity to showcase their talent. such as Air Force One, Matrix Reloaded and Revolutions, Spiderman, Eraser, Pretty Woman and Shall We Dance?; Zee Studio pioneered the initiative to add English subtitles as well as critically acclaimed films such as Cinderella to English films telecast in India, and its ‘now playing’ Man, Motorcycle Diaries, Erin Brockovich and Mona Lisa trend has received a warm response. With the initiative Smile. More recently, the channel has enriched its library, of including subtitles the channel widened its reach with blockbuster titles like Pirates of the Caribbean: Dead of English films to a much larger section of the Indian man’s Chest, the Talented Mr. Ripley, Coyote Ugly, audience that was unfamiliar with different accents. This Chicago, Basketball Diaries, Dead Poets Society, Frida, initiative was so well received that many other channels Good will Hunting, The Pink Panther, Scream 1 and 2, have imbibed it. Spy Kids 1 and 2 and The Chronicles of Narnia. During the year it also telecast some exciting satellite premieres 48 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Our People

At Zee Entertainment, understanding the diversity of its employees, viewers, programme partners and communities is about recognising, respecting and Human Capital ValUation evaluating talent. Organizational Effectiveness Embracing multi-cultural people with diverse background Amount is an imperative for driving the best results and a Basis of Calculation in Millions harmonious workforce. Zee Entertainment’s workforce comprises a diverse mix of various points of view and Revenue Factor Total Revenue / (Revenue per Total FTE (Full Time 14 talent from all round the World which is highly valued Employee) Equivalent) and well rewarded. Almost 80 per cent of the employees Expense Factor at Zee Entertainment are less than 35 years of age and Operating Expenses / (Expense Per 10 they thrive in a work environment that brings together Total FTE Employee) bright, agile minds with varying perspectives challenging conventional thinking and closed minds. Zee believes INCOME FACTOR (Total Revenue - (Income Per Operating Expenses)/ 4 that its pioneering steps in understanding people and the Employee) Total FTE work place will revolutionise creative thought processes, Total Revenue - encourage an out-of-the-box mindset, create innovative HUMAN CAPITAL (Operating Expenses 5 overall approach and stimulate break-through ideas that VALUE ADDED - Compensation Cost)/ address viewer requirements. Total FTE

Zee invests in people development. Talent is recognised and nurtured here, which in turn enables the network to Organizational Age Profile (%) realise its full potential. The Human Resource Department works hard to recruit, train and develop people with the 2 most promising future and career in view. 13 Between 20-30 36 80% of the employees are less than Between 41-50 35 years of age Between 31-40 Between 51 & Above 45% Sales & Marketing employee 49 are MBAs

30% of programming employees Organizational Gender Profile (%) have over 10 years experience in Programming 23

Female Male 77 zee entertainment believes “ we are the people we entertain”. Taking Entertainment Places Operational Review Governance & Financials 49

Our People Notice CFO Certification Statutory Reports Notice

Notice is hereby given that the Twenty-Eighth Annual General Meeting of the Members of Zee Entertainment Enterprises Limited will be held at Nehru Centre, Nehru Auditorium, Dr. Annie Besant Road, Worli, Mumbai 400 018 on Friday, the 29th day of October 2010, at 10.30 a.m., to transact the following businesses:

ORDINARY BUSINESS: 1. To receive, consider and adopt the Audited Balance Sheet as at March 31, 2010, the Profit & Loss Account of the Company for the financial year ended on that date on a stand alone and consolidated basis and the Reports of the Auditors and Directors thereon.

2. To confirm the Interim Dividend paid, and to declare Final Dividend, on equity shares for the financial year ended March 31, 2010.

3. To appoint a Director in place of Mr. Laxmi N Goel, who retires by rotation, and being eligible, offers himself for reappointment.

4. To appoint a Director in place of Mr. Nemi Chand Jain, who retires by rotation, and being eligible, offers himself for reappointment.

5. To appoint a Director in place of Prof R Vaidyanathan, who retires by rotation, and being eligible, offers himself for reappointment.

6. To appoint M/s. MGB & Co., Chartered Accountants, Mumbai, having Firm Registration No. 101169W, as the Statutory Auditors of the Company to hold such office from the conclusion of this meeting until the conclusion of the next Annual General Meeting at a remuneration to be determined by the Board of Directors of the Company.

SPECIAL BUSINESS: 7. To consider and if thought fit, to pass, with or without modification, the following resolution as an Ordinary Resolution. “Resolved that pursuant to the provisions of Section 198, 269, 309 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, the Company hereby accords its approval for re-appointment of Mr. Punit Goenka as Managing Director & Chief Executive Officer of the Company for a period of five (5) years with effect from January 1, 2010, upon the terms and conditions including remuneration as set out in the Explanatory Statement annexed to the Notice convening this Annual General Meeting, with liberty to the Board of Directors (hereinafter referred to as ‘The Board’ which term shall be deemed to include any Committee of the Board constituted to exercise its powers, including powers conferred by this resolution) to alter and vary the terms and conditions of the said appointment including remuneration, subject to the condition that the aggregate of the remuneration, perquisites / benefits including contribution to retiral funds as applicable, payable to Mr. Punit Goenka shall be within the limits prescribed under the Companies Act, 1956 or any amendment or re-enactment thereof.

Resolved further that the Board be and is hereby authorized to do all acts, deeds and things as may be necessary, proper or expedient to give effect to this resolution.”

8. To consider and if thought fit, to pass, with or without modification, the following resolution as a Special Resolution. “Resolved that, subject to such approvals as may be necessary, the Non-Executive Directors of the Company be paid, annually for a period of five (5) financial years commencing from the financial year ended March 31, 2011, commission of an amount not exceeding one percent of the net profits of the Company, as provided under Section 309(4) of the Companies Act, 1956 and computed in the manner referred to in Section 198(1) of the Companies Act, 1956, or any amendment or re-enactment thereof, in addition to the sitting fees for attending the meeting of the Board of Directors of the Company or any Committee thereof, to be divided amongst the Directors aforesaid in such manner and subject to such ceiling as the Board of Directors of the Company may from time to time determine.” 50 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Notice (contd.)

9. To consider and if thought fit, to pass, with or 11. To consider and if thought fit, to pass, with or without modification, the following resolution as without modification, the following resolution as an Ordinary Resolution. an Ordinary Resolution. “Resolved that pursuant to the provisions of Section “Resolved that: 16, 94 and other applicable provisions, if any, of (a) in accordance with applicable provisions of the the Companies Act, 1956 and consequent to the Companies Act, 1956 (the Act), and the Securities amalgamation of ETC Networks Limited (ETC) and Exchange Board of India (Issue of Capital with the Company in terms of Composite Scheme and Disclosure Requirements) Regulations 2009 of Amalgamation and Arrangement between the (the Regulations), including any amendment or Company, ETC and Zee Learn Ltd approved by the re-enactment of the Act and/or the Regulations Hon’ble Bombay High Court vide Order dated July and the enabling provisions of the Articles of 16, 2010, the differential Authorised Share Capital of Association of the Company and subject to such the Company being an amount of Rs. 649,200,000/- approvals, consents, permissions and sanctions, (Rupees Sixty Four Crores and Ninety Two Lacs as may be necessary from appropriate authorities, only) added to the existing Authorised Share Capital consent of Members be and is hereby accorded in pursuance of Clause 8 of the said Scheme, be re- to the Board of Directors of the Company (‘the classified / sub-divided into 649,200,000 (Sixty Four Board’, which term shall be deemed to include Crores Ninety Two Lacs) Equity Shares of Re. 1 each any Committee thereof) for capitalization of a and that in consequence thereof the existing Clause sum not exceeding Rs. 493,378,066 (Rupees V of the Memorandum of Association of the Company Forty Nine Crores Thirty Three Lacs Seventy relating to share capital be substituted by the following Eight Thousand Sixty Six only) from the Capital clause: Redemption Reserve and/or Securities Premium Account for the purpose of issue of Bonus Equity V. The Authorised Share Capital of the Company is Shares of Re. 1/- (Rupee One) each, credited as Rs. 1,399,200,000/- (Rupees One Hundred Thirty fully paid-up Equity Shares, to the holders of the Nine Crores Ninety Two Lacs Only) divided into Equity Shares of the Company, whose names 1,399,200,000 (One Hundred Thirty Nine Crores shall appear in the Register of Members or in the Ninety Two Lacs) Equity Shares of Re. 1/- (Rupee respective beneficiary account with their respective One) each.” Depository Participants, on the ‘Record Date’ to 10. To consider and if thought fit, to pass, with or be determined by the Board for the purpose, in without modification, the following resolution as a the proportion of One (1) Bonus Share of Re. 1/- Special Resolution. (Rupees One) each for every One (1) fully paid-up “Resolved that pursuant to Section 31 and other Equity Share of Re. 1/- (Rupees One) each held applicable provisions, if any of the Companies Act, by them and that the Bonus Shares so distributed 1956 and consequent to reclassification / sub-division shall, for all purposes, be treated as an increase in of the differential Authorised Share Capital of the the nominal amount in the Capital of the Company Company being an amount of Rs. 649,200,000/- added held by each such member, and not as income; to the existing Authorised Share Capital in pursuance of (b) the Bonus Shares so issued/ allotted shall be Clause 8 of the Composite Scheme of Amalgamation subject to the terms and conditions contained in and Arrangement between the Company, ETC and Zee the Memorandum and Articles of Association of the Learn Ltd approved by the Hon’ble Bombay High Court Company and shall rank pari-passu in all respects vide Order dated July 16, 2010, the existing Article 3 with the existing fully paid-up Equity Shares of the (a) of the Articles of Association of the Company be Company as at the Record Date including listing at substituted by the following Article: the Stock Exchanges, save and except that they Article 3 (a). The Authorised Share Capital of the shall not be entitled to any dividend in respect of Company is Rs. 1,399,200,000/- (Rupees One Hundred any financial year up to and including March 31, Thirty Nine Crores Ninety Two Lacs Only) divided into 2010; 1,399,200,000 (One Hundred Thirty Nine Crores Ninety Two Lacs) Equity Shares of Re. 1/- (Rupee One) each.” Taking Entertainment Places Operational Review Governance & Financials 51

Notice CFO Certification Statutory Reports

(c) that in the case of Members who hold Equity (India) Limited, in respect of shares held in electronic form, Shares (or opt to receive the Bonus Shares) as at the end of the business day on October 8, 2010. in dematerialized form, the Bonus Shares be credited to the respective beneficiary accounts By Order of the Board of the Members with their respective Depository Place: Mumbai M Lakshminarayanan Participants and in the case of Members who Date: September 23, 2010 Executive Vice President & hold Equity Shares in physical certificate form, the Company Secretary share certificates in respect of the Bonus Shares be dispatched, within such time as prescribed by Registered Office: law and the relevant authorities; Continental Building, 135, Dr. Annie Besant Road, (d) that the issue and allotment of the Bonus Shares Worli, Mumbai 400 018. to Non-Resident Members, Foreign Institutional Investors (FIIs) and other foreign investors shall be subject to the requisite approval of the Ministry NOTES: of Finance (Foreign Investment Promotion Board), 1. A member entitled to attend and vote at the meeting Ministry of Industry (Department of Industrial may appoint a proxy to attend and vote on a poll on Policy and Promotion) or the Reserve Bank of his behalf. A proxy need not be a member of the India, as applicable; Company. Proxies, in order to be effective, must be received at (e) for the purpose of giving effect to this Resolution the Registered Office of the Company not less than and matters connected with or incidental to 48 hours before the commencement of the Annual issuance and/or listing of Bonus shares, the Board General Meeting. be and is hereby authorized to do all such acts/ 2. Corporate Members are requested to send to the deeds, matters and things and give such directions Registered Office of the Company, a duly certified copy as may be necessary or expedient and to settle of the Board Resolution, pursuant to Section 187 of the any question, difficulty or doubt that may arise in Companies Act, 1956, authorizing their representative this regard as the Board in its absolute discretion to attend and vote at the Annual General Meeting. deem fit, without being required to seek any 3. Explanatory Statements pursuant to Section 173(2) further consent or approval of the shareholders of the Companies Act, 1956, relating to the Special Businesses to be transacted at the Annual General or otherwise to the end and intent that they shall Meeting, are annexed. be deemed to have given their approval thereto expressly by the authority of this resolution.” 4. Additional information, pursuant to Clause 49 of the Listing Agreement(s) with Stock Exchanges, on The Register of Members and Share Transfer Books of Directors recommended by the Board for appointment/ the Company will remain closed from Saturday, October 9, re-appointment at the Annual General Meeting forms part of the Report on Corporate Governance in the 2010 to Tuesday, October 12, 2010 (both days inclusive). Annual Report. Share Transfers received in order at the Registered 5. Members / Proxies should bring their Attendance Slips Office of the Company or at the office of the Registrar of along with copy of the Annual Report to the meeting. the Company, by 5.30 p.m. on October 8, 2010, will be processed for payment of final equity dividend, if declared, 6. Members who are holding Company’s shares in dematerialised form are required to bring details of to the transferees or their mandatees. their Depository Account Number for identification. Final Equity Dividend, if approved by Members at the 7. Queries on accounts and operations of the Company, ensuing Annual General Meeting, will be paid to all those if any, may be sent to the Company Secretary seven shareholders whose name appear in the Register of days in advance of the meeting so as to enable the management to keep the information ready at the Members of the Company, after giving effect to all valid Meeting. share transfers in physical form lodged with the Company or its Registrar on or before October 8, 2010 and in the 8. Members holding equity shares in physical form are list of beneficial owners furnished by National Securities requested to notify the change of address / dividend Depository Limited and/or Central Depository Services mandate, if any, to the Company’s Registrar and 52 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Notice (contd.)

Share Transfer Agent, M/s. Sharepro Services (India) 2. Remuneration Pvt. Ltd., at 13AB, Samhita Warehousing Complex, a) Basic Salary: Second Floor, Sakinaka Telephone Exchange Lane, The Basic Salary of Mr. Punit Goenka shall be in Off Andheri Kurla Road, Sakinaka, Andheri (East), the range of Rs. 16,75,000 to Rs. 40,00,000 per Mumbai-400072 and/or at 912, Raheja Centre, Free month, with the authority to the Board of Directors Press, Journal Road, Nariman Point, Mumbai-400021. to determine any merit based increase from time to time within the said scale, the first of such increase 9. Under Section 109A of the Companies Act, 1956, shall be effective from April 1, 2010. shareholders are entitled to make nomination in respect of shares held by them in physical form. Shareholders b) Perquisites & Allowances: desirous of making nominations are requested to send In addition to the basic salary payable, Mr. Goenka their requests in Form No 2B in duplicate (which will be shall be entitled to perquisites and allowances like: made available on request) to M/s Sharepro Services i. Company maintained accommodation or (India) Pvt. Ltd. House Rent Allowance in lieu thereof subject to a maximum of 50% of Basic Salary as per 10. Dividend for the financial year ended March 31, 2003, rules of the Company. which remains unpaid or unclaimed, will be due for transfer to the Investor Education and Protection Fund ii. Personnel allowance of Rs. 2,25,000/- of the Central Government (‘IEPF’) in November 2010. per month with such increase as may be determined by the Board, subject to a ceiling Members who have not encashed their dividend of 25% of Basic Salary. warrant(s) for the financial year ended March 31, 2003, or any subsequent financial year(s), are requested to iii. Medical reimbursements, Leave Travel lodge their claims with the Company’s Registrar and Allowance (subject to 10% of basic salary in a Share Transfer Agent. Members are advised that in year), club fees, personnel accident & medical terms of provisions of Section 205C of the Companies insurance, use of chauffeur driven Company Act, 1956, once unclaimed dividend is transferred to car, telecommunication facilities at residence IEPF, no claim shall lie in respect thereof. and such other perquisites and allowances in accordance with rules of the Company.

EXPLANATORY STATEMENT UNDER SECTION iv. Company’s contribution to provident fund, 173(2) OF THE COMPANIES ACT 1956 gratuity and leave encashment as per the rules of the Company; and Item No. 7 Mr. Punit Goenka, was earlier appointed as a Whole-time v. Annual performance bonus/incentive, if any, Director of the Company for a period of 5 years with effect based on the performance criteria as laid from January 1, 2005, which was approved by the Members’ down by or approved by the Board. resolution passed at 23rd Annual General Meeting held on Perquisites shall be evaluated as per Income Tax September 28, 2005. Rules, wherever applicable. In the absence of any Upon the expiry of the current term, Board of Directors of such rules, perquisites shall be evaluated at actual the Company at its meeting held on October 29, 2009, had cost. approved re-appointment of Mr. Punit Goenka as Managing c) Overall Remuneration: Director & Chief Executive Officer of the Company for a The aggregate of salary, perquisites and period of 5 years with effect from January 1, 2010 on the allowances in any one financial year shall not terms as detailed herein: exceed the limits prescribed under Section 1. Tenure 198, 309 and other applicable provisions of the The appointment of Mr. Punit Goenka as the Managing Companies Act, 1956, read with Schedule XIII to Director shall be for a period of 5 years from January 1, the said Act for the time being in force. 2010. d) In the event of loss or inadequacy of profit in any financial year during the currency of tenure of Taking Entertainment Places Operational Review Governance & Financials 53

Notice CFO Certification Statutory Reports

services of the Managing Director, the payment of Item No. 9 & 10 salary, perquisites and other allowances shall be As per Clause 8 of the Composite Scheme of Amalgamation governed by the limits prescribed under Section II and Arrangement between the Company, ETC Networks of Part II of Schedule XIII of the Companies Act, Limited and Zee Learn Limited (‘Scheme’), upon merger 1956. of ETC Networks Limited (‘ETC’) with the Company, the existing Authorized Share Capital of the Company shall The Board recommends Resolution no. 7, for the approval stand increased without any further act, instrument or deed of the Members. on the part of the Company including payment of Stamp None of the Directors of the Company, except Mr. Punit duty and fees payable to the Registrar of Companies, by Goenka, his father Mr. Subhash Chandra & relative the Authorised Share Capital of ETC Networks Limited. Mr. Laxmi N. Goel, are concerned or interested in this Upon the said Scheme having been approved by Hon’ble resolution. Bombay High Court vide Order dated July 16, 2010 and the Item No. 8 Scheme becoming effective on and from August 30, 2010, At the 24th Annual General Meeting held on December 28, the Authorised Share Capital of the Company automatically 2006, the Members had approved payment of Commission stood increased from Rs. 750,000,000 (Rupees Seventy of upto 1% of the Net Profits to the Non-Executive Directors Five Crores only) to Rs. 1,399,200,000 (Rupees One for a period of 5 years commencing from financial year Hundred Thirty Nine Crores Ninety Two Lacs Only) in ended March 31, 2006, in addition to the sitting fees for pursuance of the said Clause 8 of the Scheme by addition attending the meeting of the Board of Directors of the of Rs. 649,200,000/- (Rupees Sixty Four Crores and Ninety Company or any Committee thereof. The said proposal Two Lacs Only) being the Authorised Share Capital of was thereafter approved by Ministry of Corporate Affairs ETC. However since the Authorised Share Capital of ETC vide its letter no. 12/143/2007-CL-VII dated July 13, 2007. comprised of Equity Shares of Rs. 10 each, it is deemed necessary to reclassify / sub-divide the said additional With the focus on Corporate Governance, the roles and Authorised share capital into Equity Shares of Re. 1 each responsibilities of Non-Executive Directors have undergone by altering the Authorised Share Capital clause of the significant changes demanding greater involvement in the Memorandum of Association and Articles of Association of supervision of the Company. It is therefore desirable that the Company. the compensation payable to the Non-Executive Directors should be reasonably adequate to attract independent Pursuant to the provisions of Section 31, 94 and other professionals to guide the Company. Your Board at its applicable provisions of the Companies Act, 1956, meeting held on September 23, 2010 has recommended any alteration to the Authorised Share Capital would payment of Commission to Non-Executive Directors for a require approval of the shareholders and the proposed period of five financial years commencing from FY 2010-11, amendments to the Memorandum & Articles of Association subject to your approval and within the limits permissible of the Company are consequential in nature. under the Companies Act, 1956 or any amendment or re- The Board recommends the Ordinary & Special resolutions enactment thereof. Such commission would be in addition as set out in Item No. 9 and 10 respectively for approval by to the sitting fees for attending the Meetings of the Board or the Members. any Committee thereof. None of the Directors of the Company are in any way In accordance with the provisions of Section 309(4) of the concerned or interested in these resolutions. Companies Act, 1956, payment of remuneration by way of Commission to Non-Executive Directors of the Company, Item No. 11 in addition to sitting fees, shall be subject to approval of the In view of the accrued position on Reserves & Surplus of Members by way of Special Resolution. your Company as at March 31, 2010, your Directors have The Board recommends resolution No. 8 for your approval great pleasure in proposing issue of Bonus equity shares of by way of Special Resolution. Re. 1 each, subject to such approvals as may be required, by capitalizing a sum not exceeding Rs. 493,378,066 All Non-Executive Directors may be deemed to be (Rupees Forty Nine Crores Thirty Three Lacs Seventy Eight interested or concerned in this Special Resolution. 54 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Notice (contd.)

Thousand Sixty Six only) from the balance lying in Capital a) Options remaining unexercised, whether vested Redemption Reserve Account and/or Securities Premium or not, on the Record Date with respect to the Account of the Company (as per the Audited Accounts of number of outstanding Options and the Exercise the Company for the financial year ended March 31, 2010) Price; and and applying the said sum in paying up in full for issue of b) The balance options (approved by the up to 493,378,066 Ordinary Shares of Re. 1/- each to the shareholders at the 27th Annual General Meeting Members of the Company in proportion of One (1) Bonus held on August 18, 2009) which remain unissued Equity Share of Re. 1/- each for every One (1) fully paid-up on the Record Date. Equity Share of Re. 1/- each held by them. The Board recommends resolution no. 11 for approval of The amount to be capitalized under the proposed resolution the Members. includes the amount necessary for issue of Bonus Shares upon exercise up to a maximum of 4,340,000 Stock Your Directors may be deemed to be interested in this Options issued to the Option holders in accordance with resolution to the extent of their respective holding of shares the Employee Stock Option Scheme of the Company and/or stock options in the Company. (ZEEL ESOP 2009) as vested or would vest prior to the Record Date to be determined by the Board of Directors By Order of the Board of your Company for the purpose of issue of such Bonus M Lakshminarayanan Shares and shall stand reduced to the extent such Options Executive Vice President & Company Secretary are not exercised prior to the Record Date. Place: Mumbai Consequent upon issue of Bonus Shares, in accordance Date: September 23, 2010 with the enabling provisions of ZEEL ESOP 2009 read with the Securities and Exchange Board of India (Employee Registered Office: Stock Option Scheme and Employee Stock Purchase Continental Building, Scheme) Guidelines, 1999, appropriate adjustments will 135, Dr. Annie Besant Road, be made in respect of Worli, Mumbai 400 018. Taking Entertainment Places Operational Review Governance & Financials 55

Notice CFO Certification Statutory Reports

CERTIFICATION ON FINANCIAL STATEMENTS OF THE COMPANY

We, Punit Goenka, Managing Director & CEO and Hitesh Vakil, President & Chief Financial Officer of Zee Entertainment Enterprises Limited (‘the Company’), certify that: a. We have reviewed the financial statements and the cash flow statement of the Company for the year ended March 31, 2010 and that to the best of our knowledge and belief: i) these statements do not contain any materially untrue statement or omit any material fact or contain statement that might be misleading;

ii) these statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations. b. To the best of our knowledge and belief, no transactions entered into by the Company during the year ended March 31, 2010 are fraudulent, illegal or violative to the Company’s Code of Conduct. c. We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have evaluated the effectiveness of the internal control systems of the Company pertaining to financial reporting and have disclosed to the Auditors and Audit Committee deficiencies in the design or operation of such internal controls, if any, of which we are aware and steps taken or proposed to be taken to rectify these deficiencies. d. During the year: i) there has not been any significant change in internal control over financial reporting; ii) there have not been any significant changes in accounting policies; and iii) there have been no instances of significant fraud of which we are aware that involve management or other employees having significant role in the Company’s internal control system over financial reporting.

Hitesh Vakil Punit Goenka President & Chief Financial Officer Managing Director & CEO

Place: Mumbai Date: September 23, 2010 56 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Directors’ Report

To The Members Your Directors take pleasure in presenting the Twenty Eighth Annual Report together with the Audited Statement of Accounts of the Company for the year ended March 31, 2010.

RESPONSIBILITY STATEMENT In terms of and pursuant to Section 217 (2AA) of the Companies Act, 1956, in relation to the Annual Statement of Accounts for the Financial Year 2009-2010, your Directors state and confirm that:

a) these Accounts have been prepared on a ‘going concern’ basis and in such preparation the applicable accounting standards had been followed with proper explanation relating to material departures;

b) your Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year, and of the profit of the Company for that year; and

c) your Directors had taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 as amended, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. Taking Entertainment Places Operational Review Governance & Financials 57

Statutory Reports Standalone Financials Consolidated Financials

The total cash outflow on account of Dividend including the interim dividend already paid and the tax on such dividend distribution would aggregate to Rs. 2270 Million, resulting in a payout of 40% of the profits of the Company.

FINANCIAL RESULTS The Financial Performance of your Company for the year ended March 31, 2010 is summarized below:

(Rs./Thousand) Particulars Year ended Year ended 31.03.2010 31.03.2009 Sales & Services 12,787,436 12,102,425 Other Income 1,061,815 1,050,920 Total Income 13,849,252 13,153,345 Total Expenses 7,765,828 9,391,442 Profit before Tax & Exceptional Items 6,083,424 3,761,903 Less Exceptional Item - Provision for Diminution in Value of Investment - (25,806) Provision for Taxation (net) 495,021 690,263 Profit after Tax 5,588,403 3,097,446 Add: Balance brought forward 8,893,473 7,209,482 Amount available for appropriations 14,481,876 10,306,928 Appropriations Dividend 1,946,762 868,014 Tax on Dividend 323,332 145,441 General Reserve 1,100,000 400,000 Balance carried forward 11,111,782 8,893,473

DIVIDEND As the Members are aware, your Directors had approved payment of a Special Interim Dividend of Rs. 2/- per equity share of Re 1 each in April 2010. Your Directors are now pleased to recommend a Final Dividend of Rs. 2/- per equity share of Re 1/- each, for the Financial Year 2009-10. The total cash outflow on account of Dividend including the interim dividend already paid and the tax on such dividend distribution would aggregate to Rs. 2270 Million, resulting in a payout of 40% of the profits of the Company. 58 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Directors’ Report (contd.)

BUSINESS OVERVIEW Zee regional channels have been leaders and trendsetters The year saw your Company successfully implement a in their respective regional markets and continued to do so range of initiatives to overcome the unique challenges through the year, registering strong growth in viewership, of recession and unabated growth in number of new despite the high clutter and fragmentation due to scores of entrants. In addition your Company’s ability to capitalize new channels. Zee Marathi continued to be the dominant on such upcoming opportunities as digital platform growth, leader in Marathi genre. Trend-setting shows like Hafta by leveraging the strength of your Company’s portfolio Bandh, Maharashtracha Superstar, Yala Jeevan Aise of offerings, to cater to multiple viewer groups and their Naav and Kunku have created a strong channel identity evolving preferences has put your Company ahead and at and association in the minds of the audience. In addition, the forefront of a highly competitive market. a slew of blockbuster movies and events made Zee Marathi the preferred choice for discerning as well as mass Zee TV maintained leadership in the crucial Prime Time viewers. Zee Telugu registered the best growth in Telugu band on weekdays and gave the viewers the No 1 fiction and touched its highest ever viewership since launch. The show, Pavitra Rishta in Hindi general entertainment channel also had among the best shows including Aata, genre. The leadership in Non-fiction genre continued with a dance show, which was the No. 1 non-fiction show in launch of Dance India Dance 2 staying much ahead of the Telugu. The channel also maintained leadership in morning competition week after week and the year also marked band and differentiated content in afternoon for women. In completion of 1000 episodes of Saregamapa - one of the Bengali genre, Zee Bangla continued to delight the Zee TV’s biggest and oldest brands. The celebration of Bengali viewers and challenge for leadership with new Zee TV’s endearing relationship with viewers was marked content such as Mirakkel Akkel Challenger 5 which was by the record ratings that Zee Rishtey Awards clocked, the No.1 performing reality show across West Bengal. Zee becoming the highest rated event in the year, far ahead Kannada covered new ground by building and dominating of the other events of the year. Jhansi Ki Rani was also new viewership bands in morning and late night by offering launched, successfully upstaging the slot leader & adding a differentiated content including a morning religious band new flavor of historical drama to the channel and the genre. and late prime comedy content. In the Hindi movie genre, Zee Cinema retained its Zee Café and Zee Studio have been successful in attracting leadership, resonating with properties and movies that discerning niche Indian audiences by offering some of the were loved by the viewers. Showcasing the biggest films best English content including Hollywood movies, the best of the year to interviews with the biggest stars, the channel of American television series & sitcoms. had it all. Shanivaar Ki Raat, Amitabh Ke Saath came back with a bang during the year with the biggest films of Zee further expanded its business presence internationally Amitabh Bachchan. In a first for Hindi movie channels, the increasing its reach within the non penetrated markets and star himself featured on the channel for the entire season, growing its share within the South Asian subscription & in specially created break content, to speak about his advertising revenue pie. Zee International channels were experiences on 15 of these films. Several other initiatives among the top rated in markets across US, UK, Middle East, including the re-branding of the Sunday 8 PM slot as ‘Lage South Africa & APAC thus consistently generating viewer Raho’, where viewers get to see their favourite films with few interest in both South Asian & mainstream audiences breaks have been a huge hit with viewers. This became the resulting in new advertisers & subscribers coming on board highest rated property for Zee Cinema, and was often the The constant efforts, some of which have been listed leading slot across the genre. Zee Cinema also launched above, of various channels of your Company to “delight” ‘Buzz of the Week’ featuring the biggest stars of Bollywood viewers by setting new trends, has greatly strengthened promoting their upcoming releases. your Company’s long standing relationship with viewers. Taking Entertainment Places Operational Review Governance & Financials 59

Statutory Reports Standalone Financials Consolidated Financials

Zee further expanded its business presence internationally increasing its reach within the non penetrated markets and growing its share within the South Asian subscription & advertising revenue pie.

This has helped it to successfully ride the recession by appropriate approvals the said Composite Scheme of garnering large share of existing advertising spending and Amalgamation and Arrangement became effective from attracting new advertising. August 30, 2010 and in consideration of amalgamation of ETC with your Company, your Company issued Your Company has also made huge strides in the fast and allotted 4,413,488 equity shares of Re 1 each of growing digital delivery space with a range of compelling the Company to the shareholders of ETC (other than and exciting offerings for viewers subscribing to DTH the Company) on September 23, 2010 at the share and Digital Cable platforms. The positive effect is being exchange ratio approved under the Scheme viz. 10 reflected in the growth in subscription revenues. (Ten) fully paid up Equity Shares of Re 1 each of the Company for every 11 (Eleven) Equity Shares of CORPORATE RESTRUCTURING Rs. 10/- each held in ETC. In consideration of During the year under review, with a view to consolidate demerger of Education Business Undertaking from the general entertainment broadcasting, your Board had your Company vesting with Zee Learn Limited (Zee undertaken and approved the following Scheme(s) of Learn), Zee Learn shall be issuing its equity shares Arrangements: to the shareholders of the Company at an exchange Demerger of Regional General Entertainment Channel ratio of 1 (one) fully paid up Equity Share of Re 1 each Business Undertaking (comprising of Zee Marathi, Zee of Zee Learn for every 4 (Four) Equity Shares of Re 1 Bangla, Zee Talkies, Zee Telugu, Zee Cinemaalu and each held in the Company as on the Record Date; and Zee Kannada television channels) of Zee News Limited Demerger of 9X Channel Business Undertaking of INX (ZNL) vesting with the Company on the Appointed Media Private Ltd (now known as 9X Media Private Ltd Date January 1, 2010. Upon appropriate approvals the - ‘9X Media’) vesting with the Company as at the closing said Scheme of Arrangement became effective from of March 31,2010 (Appointed Date). Upon appropriate March 29, 2010 and in pursuance of the Scheme, your approvals the said Scheme of Arrangement became Company issued and allotted 50,476,622 equity shares effective from September 22, 2010 and in consideration of Re 1 each of the Company to the shareholders of of demerger of 9X Channel Business Undertaking from ZNL on April 20, 2010 at the share exchange ratio 9X Media vesting with your Company, your Company approved under the Scheme viz. 4 (Four) fully paid up shall be issuing equity shares to the shareholders of Equity Shares of Re 1 each of the Company for every 9X Media as on June 30, 2010 at an exchange ratio of 19 (Nineteen) Equity Shares of Re 1 each held in ZNL. 1 (one) fully paid up Equity Share of Re 1 each of the Company for every 71 (Seventy-one) Equity Shares of Merger of ETC Networks Limited (ETC), a listed Rs. 10 each held in 9X Media. subsidiary of the Company with the Company (Appointed Date March 31, 2010) and upon Issuance of equity shares by the Company in pursuance such merger, demerger of Education Business of these schemes shall ultimately result in the Issued and Paid-up Share Capital of your Company increasing to Undertaking from the Company vesting with Zee 489,038,151 equity shares of Re 1 each. Learn Ltd on the Appointed Date April 1, 2010. Upon 60 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Directors’ Report (contd.)

SUBSIDIARIES & JOINT VENTURES 31, 2010 are not being attached with the Annual Report of the Company and certain financial highlights of these Domestic Subsidiaries subsidiaries are disclosed in the Annual Report. Statement During the year under review, ETC Networks Ltd (ETC), pursuant to Section 212 of the Companies Act 1956 relating the listed subsidiary of the Company acquired the entire to the subsidiaries of the Company is attached to this report. shareholding in Cornershop Entertainment Company The annual accounts of the subsidiary companies and Private Ltd which in turn held 100% stake in Cornershop related detailed information will be available for inspection Animation Private Limited, Digital Media Convergence by any Member of the Company or that of the subsidiary Limited and Re-Med Services Private Limited. companies. The Consolidated Financial Statements Subsequently, these subsidiaries amalgamated with ETC presented by the Company include financial results of its from the Appointed Date January 1, 2010 in pursuance of subsidiary companies. a Scheme of Amalgamation which became effective on April 29, 2010. In accordance with Accounting Standard AS 21 - Consolidated Financial Statements read with Accounting Overseas Subsidiaries Standard AS 23 - Accounting for Investments in Associates, Asia TV Limited, United Kingdom, one of the overseas and Accounting Standard 27 - Financial Reporting of subsidiary along with its subsidiary OOO Zee CIS Holding Interests in Joint Ventures, the audited Consolidated Limited, Russia jointly acquired 100% stake in OOO Zee Financial Statements are provided in the Annual Report. CIS Limited, a broadcasting operating Company in Russia. GROUP Your Board of Directors had in-principle approved acquisition of additional stakes of (i) 45% in Taj TV Ltd., Pursuant to the communication received by the Company Mauritius by Zee Sports International Limited, Mauritius from the Promoters, the names of Promoters and entities (ZSIL) a step-down subsidiary to make the aggregate comprising ‘group’ for the purpose of Clause 3(1)(e) of the holding to 95% and (ii) 50% in Taj Television India Private SEBI (Substantial Acquisition of Shares and Takeovers) Ltd by the Company to make it a wholly-owned subsidiary Regulations, 1997, are disclosed in the Annual Report. of the Company. SHARE CAPITAL During the year under review, your Board had approved During the Financial Year 2009-10, your Company had two joint ventures - one with Geodesic Limited in digital not issued or allotted any Equity Shares. However, in distribution and monetization of contents through the internet pursuance of the Scheme(s) of Arrangement detailed purely on subscription based revenue model and another to host and promote an India branded Entertainment Portal above, 50,476,622 and 4,413,488 Equity Shares of in a Joint Venture with Mail.com Media Corporation, USA, Re 1 each respectively were issued and allotted to the both with majority shareholding by the Company. shareholders of Zee News Ltd and ETC Networks Limited in April and September 2010. Your Company has been granted exemption by the Ministry of Corporate Affairs, Government of India, vide its letter In pursuance of the Composite Scheme of Amalgamation No. 47/518/2010-CL-III dated June 23, 2010, from the and Arrangement between the Company, ETC Networks requirement of attaching Annual Reports of the Subsidiary Limited and Zee Learn Ltd, the Authorized Share Capital of Companies to the Annual Report of the Company for the your Company shall stand increased to Rs. 1,399,200,000. financial year ended March 31, 2010. Accordingly, as As an abundant caution, your consent is sought at the required under the said approval, the annual accounts of ensuing Annual General Meeting for reclassification the subsidiaries of the Company for year ended March of the differential Authorised Share Capital of Taking Entertainment Places Operational Review Governance & Financials 61

Statutory Reports Standalone Financials Consolidated Financials

The CSR Policy is based on a belief that a Business cannot succeed in a society that fails and therefore it is imperative for business houses, to invest in the future by taking part in social-building activities.

Rs. 649,200,000 in to equivalent number of equity shares put in place a formalized system of Corporate Governance of Re 1 each. by initiating implementation of a Corporate Governance Manual which sets outs the structure, processes and In view of the current financial position of the Company practices of governance with in the Company and your Board has proposed and recommended for your its subsidiaries. Given the emerging pivotal role of approval, capitalization of reserves and issuance of Bonus Independent Directors in bringing about good governance, Equity Shares in the ratio of 1 (one) Equity Share of Re 1 your Company continues its efforts in seeking optimum each for every 1 (one) Equity Share of Re 1 each held in utilization of their expertise and involving them in all critical the Company. decision making processes.

EMPLOYEES STOCK OPTION SCHEME A separate detailed report on Corporate Governance together with the Statutory Auditors’ Certificate on During the Financial Year 2009-10, the Company compliance is attached to this Annual Report. Management’s implemented the Employees Stock Option Scheme Discussion and Analysis Report for the year under review, (ZEEL ESOP 2009) in accordance with the Securities and as stipulated under Clause 49 of the Listing Agreement with Exchange Board of India (Employee Stock Option Scheme the Stock Exchanges in India, is presented in a separate and Employee Stock Purchase Scheme) Guidelines, 1999 section forming part of the Annual Report. (‘SEBI Guidelines’) and the Remuneration Committee of your Board administers and monitors the ESOP 2009 CORPORATE SOCIAL RESPONSIBILITY scheme. Your Company as part of the Essel Group of Companies, Applicable disclosures relating to Employees Stock Options has at a unified and centralized level, put in place a as at March 31, 2010, pursuant to Clause 12 (Disclosure in Corporate Social Responsibility policy. The CSR Policy the Directors’ Report) of the SEBI Guidelines are given is is based on a belief that a Business cannot succeed in a ‘Annexure A’ to this Report. society that fails and therefore it is imperative for business houses, to invest in the future by taking part in social- PUBLIC DEPOSITS building activities. During the year, your Company has neither accepted nor During the year under review, the social activities initiatives renewed any Deposits under Section 58A and Section undertaken include (i) adoption of school(s)/village(s) 58AA of the Companies Act, 1956, read with Companies in tribal areas through Ekal Vidyalaya Foundation, an (Acceptance of Deposits) Rules, 1975. NGO that works to bring about basic literacy and health awareness amongst the tribal and rural population of India; CORPORATE GOVERNANCE (ii) supporting the Global Vipassana Foundation which Over the years, your Company has been benchmarking helps propagate Vipassana, the non-sectarian rational itself with well-established Corporate Governance practices process of self-purification with the aim of bringing about besides strictly complying with the requirements of Clause 49 of the Listing Agreement. Your Company has already 62 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Directors’ Report (contd.)

peace both within the individual and the society in general; to ensure optimal use of energy, avoid wastages and and (iii) supporting the Global Foundation for Civilizational conserve energy as far as possible. Harmony, a body which aims to create a peaceful and Technology Absorption harmonious society. In its endeavor to deliver the best to its viewers and business partners, your Company has been constantly active in DIRECTORS harnessing and tapping the latest and best technology in Mr Punit Goenka, whose term as Whole-time Director the industry. expired on December 31, 2009, was re-appointed as the Managing Director & Chief Executive Officer for a period Foreign Exchange Earnings and Outgo of Five (5) years with effect from January 1,2010, by your Particulars of foreign currency earnings and outgo during Board at the meeting held on October 29, 2009. A proposal the year are given in Schedule 18B Note 15(d) to the Notes seeking Members’ approval for appointment of Mr Punit to the Accounts forming part of the Annual Accounts. Goenka as the Managing Director forms part of the notice of the Annual General Meeting. PARTICULARS OF EMPLOYEES

Messrs Laxmi N Goel, N C Jain and Prof R Vaidyanathan, In terms of the provisions of Section 217(2A) of the Directors, retire by rotation at the ensuing Annual General Companies Act, 1956 read with the Companies (Particulars Meeting and, being eligible, offer themselves for re- of Employees) Rules, 1975, as amended, the names appointment. Your Board has recommended their re- and other particulars of the employees are set out in the appointment. ‘Annexure B’ forming part of this Directors’ Report.

AUDITORS ACKNOWLEDGEMENTS Statutory Auditors M/s MGB & Co., Chartered Accountants, Your Directors take this opportunity to place on record Mumbai, having Firm Registration No 101169W, retire at their appreciation of the dedication and commitment of the conclusion of the ensuing Annual General Meeting and, employees of the Company and its subsidiaries across the being eligible, have offered themselves for re-appointment. world at all levels that has contributed to the success of your Company and remain in the forefront of media and CONSERVATION OF ENERGY, TECHNOLOGY entertainment business. Your Directors thank and express ABSORPTION AND FOREIGN EXCHANGE their gratitude for the support and co-operation received EARNINGS AND OUTGO from the Central and State Governments - mainly the Ministry of Information & Broadcasting and the Department Your Company is into the business of Broadcasting of of Telecommunication - and other stakeholders including General Entertainment Television Channels. Since these viewers, producers, vendors, Financial Institutions, Banks, activities do not involve any manufacturing activity, most investors, service providers as well as regulatory and of the Information required to be provided under Section governmental authorities. 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the On behalf of the Board Board of Directors) Rules, 1988, is not applicable.

However the information, as applicable, are given N C Jain Punit Goenka hereunder: Director Managing Director

Conservation of Energy Place: Mumbai Date: September 23, 2010 Your Company, being a service provider, requires minimal energy consumption and every endeavor has been made Taking Entertainment Places Operational Review Governance & Financials 63

Statutory Reports Standalone Financials Consolidated Financials

Annexure to the Directors’ Report

ANNEXURE ‘A’ Statement as at March 31, 2010 pursuant to Clause 12 (Disclosure in the Directors’ Report) of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

a) Details of Options Granted and Exercise Price per Date of Grant No of Options Exercise Price Option Granted 22.10.2009 43,40,000 Rs. 239.80 Per Equity Share b) Pricing Formula The pricing formula as approved by the Shareholders of the Company, shall be the “market price” as per the SEBI Guidelines i.e. the latest available closing price prior to the date of grant of option at the Stock Exchange where there is highest trading volume c) Total number of Options vested None d) Total number of Options exercised None e) Total number of Equity Shares of Re.1/- each arising 4,340,000 as a result of exercise of Options f) Total number of Options lapsed 250,800 g) Variation of terms of Options Nil h) Money realized by exercise of Options (Rs. in Crores) Nil i) Total number of Options in force 4,089,200 j) Details of Options granted to (i) Senior managerial personnel Sr. Name No of Options granted No. during the financial year 1 Bharat Ranga 46,800 2 Hitesh Vakil 46,800 3 Joy Chakraborthy 46,800 4 Nitin Vaidya 40,950 (ii) Any other employee who received a grant in any None one year of Options amounting to 5% or more of the Options granted during that year (iii) Identified employees who were granted Options None during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant. k) Diluted Earnings Per Share pursuant to issue of Ordinary Not applicable since no option is yet vested Shares on exercise of Options calculated in accordance with Accounting Standard (AS) 20 ‘Earnings Per Share’. l) Difference, if any, between employee compensation None cost (calculated using the intrinsic value of stock option) and the employee compensation cost (calculated on the basis of fair value of options)

The issuance of equity shares pursuant to exercise of Options does not affect the profit and loss account of the Company, as the exercise will be made at the market price prevailing as on the date of grant. A certificate received by the Company from the Statutory Auditors of the Company M/s MGB & Co., Chartered Accountants, Mumbai to the effect that the Scheme has been implemented in accordance with the SEBI Guidelines and the resolution passed by the shareholders, will be placed before the Annual General Meeting and a copy of the same shall be available for inspection by the Members at the Registered Office of the Company on all working days up to the date of the ensuing Annual General Meeting. 64 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Annexure to the Directors’ Report (contd.)

ANNEXURE ‘B’ Information as per Section 217(2A) of the Companies Act, 1956 and Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended March 31, 2010 Employed throughout the year and in reciept of remuneration aggregating Rs. 24 Lacs or more per annum.

Sr. Name Age Designation Total Qualification Total Date of Previous employment No. Remuneration exp joining (Rs.) 1 Anil Anand 47 Sr. Vice President - 2,855,483 B.COM, PGD in 25 20-Nov-00 Reliance Industries Programming Marketing Ltd. (Infocom Division) 2 Ashish Sehgal 41 Sr. Vice President - Sales 3,658,565 B.COM, LLB 12 11-Jan-06 Star India Pvt. Ltd. 3 Bharat Ranga 41 Chief Operating Officer - 9,219,649 B.COM, M.B.A 19 4-Mar-98 Modi Korea International Operations Telecommunication 4 Gaurav Bahal 36 Vice President - 3,511,200 Dip In Broadcast 14 17-Apr-07 ESPN Operations Journalism 5 Hitesh Vakil 50 President & 7,507,430 B.COM, ACA. 24 1-Apr-96 Tips & Toes Chief Financial Officer Cosmetics 6 Jitesh Rajdeo 37 Sr. Vice President - Sales 3,635,188 B.COM, MMM 14 1-Jan-02 Econnect India Ltd 7 Joy Chakraborthy 43 Chief Revenue Officer 16,184,488 B.SC, MMM 17 9-Mar-05 Star India Pvt. Ltd. 8 M. Lakshminarayanan 47 Executive Vice President & 4,968,249 B.COM, ACS 26 19-Jan-06 BPL Power Projects Company Secretary 9 Mohan Gopinath 38 Sr. Vice President - 4,430,839 B.COM., MMS. 12 19-Dec-96 Nil Programming 10 Nitin Vaidya 49 Chief Operating Officer - 7,598,109 B.SC 23 19-Apr-01 Broadcast Worldwide National Channels 11 Punit Goenka 35 Managing Director 28,357,768 B.COM 12 1-Jan-05 Asc Enterprise Limited 12 Sanjoy Chatterjee 43 Sr. Vice President - Sales 2,863,295 B.COM 18 25-Apr-05 Sony Entertainment Television 13 Santosh Shendye 45 Head - Inhouse Production 3,147,802 B.A. 18 20-Nov-92 Full Lights 14 Sujay Kutty 41 Sr. Vice President - 2,910,600 B.COM 17 10-Dec-01 Sony TV Programming 15 Tarun Mehra 42 Executive Vice President 5,978,892 BE, MMS 15 7-Jan-05 Shaw Wallace 16 Anjana Kshetry 44 Sr. Vice President - Sales 2,750,336 B.COM., MASS. 20 7-Apr-00 Modi Entertainment COMM. 17 Laxmi Shetty 42 Sr. Vice President - MIS 4,063,080 B.SC, DMM 21 1-Jun-05 Bennett Coleman & Co. 18 Priyanka Datta 38 Sr. Vice President - Sales 3,901,202 MA 15 1-May-02 Sab TV 19 Shekhar Kadav 47 Sr. Vice President - I.T. 2,501,113 B.COM 21 1-Apr-04 Freelancer 20 Anurag Bedi 33 Vice President - Sales 3,018,732 HSC, Degree In 8 5-Feb-07 Star India Pvt. Ltd. Nautical SCI 21 Vijay Anand 34 Executive Assistant 2,769,990 B.SC, PGD IN ADV. 11 2-Jan-06 Star India Pvt. Ltd. Kondapaneni & COMM. 22 Mehul Shah 39 Vice President - Accounts 2,644,394 M.COM, C.A., MFM 13 11-Mar-02 Biopas India Corp Ltd.

23 Sushruta Samanta 39 Vice President - Strategy 2,870,234 B.E,PGDMM 12 25-Mar-08 Starcom & Business Development (International Markets) 24 Siju Prabhakaran 36 Dy. Vice President - Sales 2,773,221 B.TECH., M.B.A. 11 27-Sep-04 Hangama TV 25 Utpal Das 44 Sr. Vice President - 3,467,264 BE MECH & Master 20 11-Jun-08 Bennette Coleman Ltd Commercial In INTL BIZZ 26 Sunita Uchil 41 Vice President - Sales 3,522,528 BA PGD ADVT & 15 5-Sep-08 Shamal Media Services PR Sharjah UAE 27 Rahul Kumar Shaw 37 Head Of Sales - Sports 6,462,754 B.COM 9 5-Mar-09 Inx News Pvt Ltd Business 28 Gunjarav Nayak 34 Dy. Vice President - Sales 2,535,557 B.COM, PGDBM 10 1-Sep-01 Sai Service Station Taking Entertainment Places Operational Review Governance & Financials 65

Statutory Reports Standalone Financials Consolidated Financials

Employed for part of the year and in reciept of remuneration aggregating Rs. 2 Lacs or more per month.

Sr. Name Age Designation Total Qualification Total Date of Previous employment No. Remuneration exp joining (Rs.) 1 Rajesh Save 45 Executive Vice President 4,798,378 MA, PHD 21 1-May-09 Essel Corporate - Corporate Human Resources Pvt Ltd Resources 2 Roland Landers 45 Sr. Vice President - 3,184,418 BSC, MBA 20 1-Apr-09 Essel Sports Pvt Ltd Corporate Communication 3 Atul Pande 44 CEO - Sports Business 3,998,607 B.E, PGDBM 21 1-Jul-09 Cholamandalam Dbs Finance Ltd 4 Atul Das 42 Executive Vice President - 4,180,860 B.COM., M.M.S. 17 1-Jul-09 Essel Corporate Corporate Strategy & Buss Resources Pvt Ltd Dev 5 H Thaigarajan 42 Sr. Vice President - 2,531,513 BSC, MBA 16 1-Jul-09 Real Media Fz Llc Finance 6 Harish 39 Vice President - I.T 2,487,470 B.COM, MBA 15 1-Aug-09 Essel Corporate Krishnamurthy Resources Pvt Ltd 7 Hemlata Sharma 40 Vice President - 1,620,611 BA 20 12-Oct-09 Bharti Airtel Ltd Distribution 8 M Venkataraman 57 President - Corporate 6,117,224 BE, PGD IND 39 14-Oct-09 D.B. Corp Ltd ENGG 9 Gautham 42 Sr. Vice President - 1,205,860 BA, MA , PHD 19 2-Nov-09 Essel Corporate Machaiah Regional Channels Resources Pvt Ltd 10 Ajay Bhalwankar 39 Sr. Vice President - 3,860,835 M.A 17 14-May-01 Tara Channel Programming 11 Indranil Chakravarti 38 Head - Strategy & 3,122,518 BBA, CPA 13 2-May-05 JP Morgan Plc. Business Development 12 Ishwar Jha 37 CEO - DMCL 5,947,763 B.COM, PGDCA 16 9-Aug-04 Sony Music Entertainment 13 Rajib Chatterjee 38 Sr. Vice President - Zee 3,659,486 B.COM 17 27-Sep-04 Eenadu Network Bangla 14 Rudolf D'sa 41 Sr. Vice President - 5,870,837 B.A. 18 16-Oct-92 Lady London Pvt. Ltd. Operations 15 Sanjeev Lamba 49 Director - Marketing & 9,891,564 BA, MBA 27 30-Jan-08 The Weinstien Sales (Movies) Company 16 Shaswati Saradar 38 Vice President - Marketing 2,280,664 BA, PGD IN ADV 14 18-Aug-08 Maruti Suzuki India Ltd & PR 17 Priya Mishra 38 Creative Head 2,204,424 BA, MA 7 1-Sep-08 Freelancer 18 Dilip Roy 51 President - Human 3,071,830 B.A., PGDHR 27 9-Apr-08 Jubliant Organosys Ltd Resources in Ind Relations (XLRI) 19 Monali Ghosh 37 Dy. Vice President - Sales 649,851 M.A., MMM 13 15-Apr-05 Bennett Coleman & Co. 20 Himanshu Mody 32 Director - Programming 2,359,232 Msc - Finance 7 1-Apr-05 Essel Corporate University Strath Resources Pvt Ltd clyde Glasgow 21 Mukund Cairae 39 Executive Vice President - 396,013 MBA 9 1-Jul-04 Nil International Business

Notes : 1. All appointments are contractual and terminable by notice on either side. 2. None of the employees, except Mr. Punit Goenka, are related to any of the Directors. 3. Remuneration includes Salary, Allowances, Company’s Contribution to Provident Fund, Medical Benefits, Leave Travel Allowance & Other Perquisites and benefits valued on the basis of the provisions of Income Tax Act,1961. 66 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Annexure to the Directors’ Report (contd.) Rs. (8) US$ (5) US$ (2) US$ (7) GBP (2) US$ 141 US$ -13 Rs. 5,869 US$ 7,842 HKD 1,415 Rs. (4,345) ( 10 ) USD 38,154 Rs. (115,020) (Amt. In '000) For the previous financial years of the subsidary since it became a subsidiary Company US$ 67 US$ (3) Rs. (23) GBP (2) US$ (3) US$ (10) ( 9 ) US$ (13) HKD ( 23) US$ 3,028 Rs. (1,437) US$ 21,492 as it concerns the members of Rs. (16,831) Rs. (37,303) Net aggregate amount of profits the holding Company and is not dealt with in accounts of holding / (losses) of the subsidiary so far (Amt. In '000) For the financial year ended on March 31, 2010 ( 8 ) (Amt. In '000) For the previous financial years of the subsidary since it became a subsidiary

( 7 ) Net aggregate amount of profits in accounts of holding Company / (losses) of the subsidiary so far as it concerns the members of holding Company and is dealt with (Amt. In '000) For the financial year ended on March 31, 2010 1 1 34 6,000 1,000 1,002 5,000 10,000 10,000 25,000 50,000 74,000 ( 6 ) 100,000 shares holding Number of equity and/or its Company held by the subsidiaries GBP1 US $ 1 HK $ 1 US $ 1 US $ 1 US $ 1 US $ 1 US $ 1 ( 5 ) ( per Face Rs. 10/- Rs. 10/- Rs. 10/- US $ 10 equity shares share ) Rs. 100/- value of 50% 74% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% ( 4 ) Interest Holding Extent of Company's Holding Company ATL ATL ATL ZES Entertainment Studios BVI ZES Entertainment Studios BVI ZES Holding Ltd. ZMWL, BVI & ZEEL ZEEL ZEEL ZES Mauritius Ltd ZEEL ZEEL ZEEL ( 3 ) The ( 2 ) financial ended on Company Subsidiary Year of the 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 ( 1 ) Company Name of the Subsidiary Expand Fast Holdings (Singapore) Pte. Limited Apac Media Ventures Limited, Hongkong Asia Business Broadcasting (Mauritius) Limited, Mauritius ZES Mauritius Limited ZES International Limited, UK ZES Entertainment Studios Limited - BVI Asia Today Limited ( ATL ), Mauritius ZES Holdings Limited, Mauritius Zee Multimedia Worldwide Limited, BVI (ZMWL,BVI ) Zee Motion Pictures Private Limited Zee Sports Limited Taj Television India Private Limited Zee Turner Limited S tatement pursuant to ection 212 o f t h e C ompanies A ct , 1956 re l atin g subsidiar y Taking Entertainment Places Operational Review Governance & Financials 67

Statutory Reports Standalone Financials Consolidated Financials (630) US$ (2) US$ 272 US$ 991 US$ 3,827 US$ (1,836) GBP (1,039) Mauritus Rs. Yuan (2,173) Rand (5,540) AED ( (1,957) Punit Goenka (Amt. In '000) For the previous financial years of the subsidary since it became a subsidiary Managing Director

Company GBP US$ (4) Mauritus US$ (49) Rs. (259) GBP (47) GBP (52) For and on behalf of the Board (YUN 359) AED 8,369 as it concerns the members of US$ (4,294) US$ (3,728) US$ (2,007) RAND 5,920 Net aggregate amount of profits the holding Company and is not dealt with in accounts of holding / (losses) of the subsidiary so far (Amt. In '000) For the financial year ended on March 31, 2010 Director N C Jain (Amt. In '000) For the previous financial years of the subsidary since it became a subsidiary

Net aggregate amount of profits in accounts of holding Company / (losses) of the subsidiary so far as it concerns the members of holding Company and is dealt with (Amt. In '000) For the financial year ended on March 31, 2010 - - 2 1,000 3,100 1,000 2,500 1,000 1,000 shares holding Number of equity 1,000,000 and/or its Company held by the 16,438,900 26,520,004 subsidiaries Rs.1 GBP 1 GBP 1 GBP 1 US $ 1 US $ 1 US $ 1 Rand 1 ( per YUAN 1 Face equity US $ .01 Mauritus shares share ) value of US$ 1000 AED 1000 50% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Interest Holding Extent of Company's Holding Company Asia TV & Zee CIS Holdings Asia TV Limited, UK ZMWL, Mauritius ZMWL, Mauritius ZMWL,BVI Zee Sports Intl. Zee Sports Intl. ATL ATL ATL ATL ATL The financial ended on Company Subsidiary Year of the 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010 31/03/2010

Company Name of the Subsidiary 000 Zee CIS Limited, Russia # Notes: # Acquired During the Year 000 Zee CIS Holdings Limited, Russia # Zee T.V. USA, Inc. Asia T.V. Limited, UK Zee Multimedia Worldwide (Mauritius) Limited (ZMWL, Mauritius) Zee Sports Americas Limited, Mauritius Taj TV Limited, Mauritius Zee Sports International Limited, Mauritius Zee Technologies (Ghuangzhou) Limited, China Zee Telefilms Middle East FZLLC, U.A.E Zee TV South Africa (Proprietary) Limited Zee Multimedia (Maurice) Limited, Mauritius S tatement pursuant to ection 212 o f t h e C ompanies A ct , 1956 re l atin g subsidiar y Date: September 23, 2010 Place: Mumbai 68 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Annexure to the Directors’ Report (contd.)

Entities comprising of “Group” for the purpose of Regulation 3(1)(e)(i) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

Sr. Name No. 1 Churu Trading Co Private Limited 2 Ganjam Trading Co Private Limited 3 Prajatma Trading Co Private Limited 4 Briggs Trading Co Private Limited 5 Premier Finance and Trading Co Limited 6 Jayneer Capital Private Limited 7 Veena Investments Limited 8 Ambience Business Services Private Limited 9 Essel Infra Projects Limited 10 Buddha Films Limited 11 Cyquator Media Services Private Limited 12 Intrex India Limited 13 New Media Broadcast Private Limited 14 Pan India Network Infravest Private Limited 15 Pan India Network Limited 16 Prime Publishing Limited 17 Mediavest India Private Limited 18 Vasant Sagar Properties Private Limited 19 Essel Sports Private Limited 20 Aqualand India Limited 21 Wire and Wireless (India) Limited 22 Dish TV India Limited 23 Shirpur gold Refinery Limited 24 Solid Containers Limited 25 Essel Airport Infrastructure Private Limited 26 Pan India Infrastructure Private Limited 27 Essel Infra Projects Internaltional Holding Limited 28 Essel Sagar Damoh Toll Roads Limited 29 Essel Bhind Mihona Gopalpur Toll Roads Limited 30 Essel Bina Khimlasa Malthon Toll Roads Limited 31 Essel Damoh-Jabalpur Toll Roads Limited 32 Essel Entertainment Media Limited Taking Entertainment Places Operational Review Governance & Financials 69

Statutory Reports Standalone Financials Consolidated Financials

Sr. Name No. 33 Essel Ahmedabad Godhra Toll Roads Limited 34 EIP PTE Limited, Singapore 35 Jay Properties Private Limited 36 Edisons Continental Laboratories Private Limited 37 Essel Ship Breaking Limited 38 Continental Drug Company Private Limited 39 25FPS Media Private Limited 40 Pratham Media Entertainment Private Limited 41 Rama Associates Limited 42 Essel International Limited 43 Essel Agro Private Limited 44 ICL Heroes Sports Private Limited 45 ICL Rockets Sports Private Limited 46 Lahore Badshahs Private Limited 47 Dhaka Warriors Sports Private Limited 48 Royal Bengal Sports Private Limited 49 ICL Lions Private Limited 50 Maharashtra Hydrocarbon Products Private Limited 51 Digital Ventures Private Limited 52 Rupee Finance and Management Private Limited 53 Churu Enterprises LLP 54 Prajatma Enterprises LLP 55 Jayneer Enterprises LLP 56 Delgrada Limited, Mauritius 57 Lazarus Investments Limited, Mauritius 58 Essel Holdings Limited, Mauritius 59 Packaging Products Investments Limited 60 Afro Asian Satellite Communications Limited 61 Ambience Advertising Private Limited 62 Asian Satellite Broadcast Private Limited 63 Essel Corporate Resources Private Limited 64 Zee News Limited 70 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Report on Corporate Governance

COMPANY’S GOVERNANCE PHILOSOPHY Corporate Governance, which assumes great deal of importance at Zee Entertainment Enterprises Limited (ZEEL), is intended to ensure value creation for all its stakeholders. ZEEL believes that the governance process must ensure adherence and enforcement of the principles of sound Corporate Governance with the objectives of fairness, transparency, professionalism, trusteeship and accountability, while facilitating effective management of the businesses and efficiency in operations. The Company is committed to achieve and maintain highest standards of Corporate Governance on an ongoing basis. In its endeavor to improve in all aspects of Corporate Governance, ZEEL’s Board has, during financial year 2008-09, approved and implemented a comprehensive Corporate Governance Manual which contains guidelines covering decision making authority levels, the policies and processes which provide an effective and flexible governance framework in the Company realizing the need to ensure an effective mechanism of checks and balances with transparency and accountability as the hallmark.

BOARD OF DIRECTORS a) Composition and Category of Directors Zee Entertainment has a balanced Board with combination of Executive and Non-Executive Directors, to ensure independent functioning. Non-Executive Directors include independent professionals with experience in business, finance, taxation, technology and media. Independent Directors of the Company provide appropriate annual certifications to the Board confirming satisfaction of the conditions of their being independent as laid down in Clause 49.

Composition of the Board as on March 31, 2010

Category of Directors No. of Directors Percentage to Total No. of Directors Executive Director(s) 1 10% Non-Executive Independent Directors 6 60% Other Non-Executive Directors 3 30% Total 10 100%

Particulars of Directors, their attendance at the Annual General Meeting and Board Meetings held during the financial year 2009-10 and also their other directorships held in Public Companies (excluding Foreign Companies and Section 25 Taking Entertainment Places Operational Review Governance & Financials 71

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Companies) and membership of other Board Committees (excluding Remuneration Committee) as at March 31, 2010 are as under:

No. of memberships of Board Name of Director Category Attendance at No. of Sub- Committees Board 27th AGM Directorship As Member As Chairman Meetings held on of other (Total 9 18.08.09 companies Meetings) Promoter - Ashok Kurien 7 Yes 2 1 1 Non- Executive Independent - B. K. Syngal 6 No 3 2 2 Non- Executive Independent - Gulam Noon 5 Yes - - - Non-Executive Promoter - Laxmi N. Goel 4 No 8 1 - Non-Executive Independent - M. Y. Khan 5 Yes 1 - - Non-Executive Independent - N. C. Jain 9 Yes 2 - - Non-Executive Independent - Rajan Jetley 3 Yes - - - Non-Executive Independent - R. Vaidyanathan 9 Yes 7 1 - Non-Executive Promoter - Subhash Chandra 8 Yes 6 - - Non-Executive Promoter - Punit Goenka 9 Yes 11 1 1 Executive b) Board Meetings & Procedures During the financial year under review, 9 meetings of the Board were held on April 22, 2009, June 26, 2009, July 16, 2009, October 23, 2009, October 29, 2009, December 23, 2009, December 29, 2009, January 18, 2010 and March 22, 2010. The intervening period between any two Board Meetings were well within the maximum time gap of 4 months 72 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Report on Corporate Governance (contd.)

prescribed under Clause 49 of the Listing Agreement. involved in social philanthropic work. He has been The annual calendar of meetings is broadly determined the trustee of the Agroha Vikas Trust for more than at the beginning of each year. decade. He is also the trustee of the Delhi chapter of the Trust, which undertakes a number of noble social Meetings of the Company are governed by a causes including the building and running of colleges, structured agenda. The Meeting are generally held at schools and temples. Mr. Goel was also head of affairs the Registered and Corporate office of the Company of the Sewak Sabha Hospital, Hissar, Haryana, for two at Continental Building, 135, Dr. Annie Besant Road, years. Worli, Mumbai 400 018. The Company Secretary in consultation with Chairman/Managing Director Apart from the Company, as at March 31, 2010 Mr. & Chief Executive Officer finalises agenda of the Goel holds directorship in eight (8) other Indian Public Board meetings. All major agenda items, backed up Limited Companies viz. ASC Telecommunication Ltd, by comprehensive background information, are sent East Hope Town Estate Co Ltd, East India Company well in advance of the date of the Board meetings to (Trading) Ltd, Essel International Ltd, Rama Associates enable the Board to take informed decision. Any Board Ltd, Rankey Investments & Trading Co. Ltd, Siti Energy member may, in consultation with the Chairman, bring Ltd and Zee News Ltd. up any matter for consideration by the Board. Head of As on March 31, 2010, Mr. Goel holds 1,753,000 equity Department of Finance & Accounts is normally invited shares, comprising of 0.40% of paid up capital of the to the Board meetings to provide necessary insights Company. into the working of the Company and for discussing corporate strategies. Nemi Chand Jain, 71, a post graduate in Accounts The Board periodically reviews Compliance Reports in and Law, has 38 years of experience in the Civil Service respect of various laws and regulations applicable to (as member of Indian Revenue Service). During his the Company. tenure in the civil services, he has held important positions like Chairman, Income Tax Settlement c) Brief profile of the Directors of the Company to Commission, Ex-officio Secretary to Government be appointed/re-appointed at the Annual General of India, Ministry of Finance, Chief Commissioner of Meeting Income Tax at Kanpur and Mumbai, Joint Secretary to Laxmi N. Goel, 57, is a Non-Executive Director Government of India, Ministry of Finance, Department and one of the promoters of the Company. He is of Revenue (Central Board of Direct Taxes) in-charge one of the key architects of the Essel Group of of Tax Planning and Legislation division and Foreign Companies. He started his career in 1969 trading Tax division. Mr. Jain was instrumental in negotiating agro commodities and established Rama Associates various Double-Taxation Avoidance treaties on behalf Limited along with his brothers. In 1980, he diversified of Government of India. the Group’s activities into handicraft exports and real Apart from the Company, as at March 31, 2010, Mr. estate development business. He has contributed Jain holds directorships in Superhouse Leather Ltd., enormously in the establishment and progress of Essel and Ajanta Manufacturing Ltd. Propack Ltd. At present Mr. Goel holds the position of Vice Chairman of the Essel Group of Companies and As on March 31, 2010, Mr. Jain does not hold any is actively involved in the day-to-day developmental equity shares in the Company. activities of the Group. Besides business, he is actively Taking Entertainment Places Operational Review Governance & Financials 73

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Prof. R. Vaidyanathan, 58, a graduate from Loyola Essel Group projects at the corporate decision making College, Madras, holds a Masters from the Indian level and he has also held senior positions in other Statistical Institute, Calcutta and also a Fellow Member Group Companies. Apart from the Company, Mr. Punit in Management (Doctorate) from the Indian Institute of Goenka holds executive position as Managing Director Management, Calcutta, is the Professor of Finance of Zee News Ltd., with effect from July 5, 2010. and Control at the Indian Institute of Management, Mr. Punit Goenka has participated in various intensive Bangalore and UTI Chair Professor in the area of Management Education Programmes viz., Young Capital Markets. He is known for his commendable Managers Programme at INSEAD, France and a contributions in the areas of Corporate Finance, programme on “Birthing of Giants” hosted by Young Risk Management, Pensions, etc. He was a Member Entrepreneurs’ Organization and MIT Enterprise Forum, of the L.C. Gupta Committee appointed by SEBI for Inc., Boston, USA. Derivative Trading and is currently a National Fellow of the Indian Council of Social Science Research, Apart from the Company, as at March 31, 2010, Mr. New Delhi. In the past, Prof. Vaidyanathan, also held Punit Goenka holds directorship in eleven (11) other position of President of Asia Pacific Risk and Insurance Indian Public Limited Companies, viz. Agrani Telecom Association headquartered in Singapore and he has Ltd., Diligent Media Corporation Ltd., Essel Infraprojects published a number of articles in India and abroad on Ltd., Essel Damoh-Jabalpur Toll Roads Ltd., Essel Corporate Finance and Capital Markets. Sagar Damoh Toll Roads Ltd., Essel Ship Breaking Ltd., ETC Networks Ltd., Provogue (India) Ltd., Zee Sports Apart from the Company, as at March 31, 2010, Prof Ltd., Zee News Ltd., and Zee Turner Ltd. Vaidyanathan holds directorship in seven (7) other Indian Public Limited Companies viz. Zee Turner Ltd., General As at March 31, 2010, Mr. Punit Goenka, does not hold Optics (Asia) Ltd., Conglome Techno Ltd, Gujarat state any shares in the Company. Petronet Ltd, Birla Sun Life Insurance Co. Ltd., Dalmia Cement Ventures Ltd and Shriram Properties Ltd. d) Code of Conduct

As on March 31, 2010, Prof. Vaidyanathan does not The Company has instituted a Code of Conduct for hold any shares in the Company. Members of the Board and Senior Management of the Company and the compliance of the same is affirmed by Punit Goenka, 36, a graduate from Bombay the Board and Senior Management personnel annually. University, is a young professional with an The Code has also been posted on Company’s entrepreneurial background. He began his career corporate website viz. www.zeetelevison.com. with the Essel Group which has diversified business interest in the areas of media, entertainment, gaming, packaging, telecommunications etc. Mr. Punit Goenka, son of Mr. Subhash Chandra, Chairman of Essel Group of Companies, has been contributing to several 74 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Report on Corporate Governance (contd.)

A declaration affirming compliance with the Code of Conduct by the members of the Board and Senior Management personnel is given below:

Declaration I confirm that the Company has obtained from all Directors and Senior Management personnel of the Company their affirmation of compliance with the ‘Code of Conduct for Members of the Board and Senior Management’ of the Company for the financial year ended March 31, 2010.

Punit Goenka Managing Director & CEO Mumbai, September 23, 2010

BOARD COMMITTEES Discusses the larger issues that are of vital concern to the Company including adequacy of a) Audit Committee internal controls, reliability of financial statements/ The Board has constituted an Audit Committee, other management information, adequacy of comprising of five (5) members as on March 31, 2010, provisions for liabilities and whether the audit tests four (4) of whom are Independent Directors, with Mr. are appropriate and scientifically carried out in N. C. Jain, a Non-Executive Independent Director as accordance with Company’s business and size of its Chairman. operations. The Composition of the Audit Committee as on March The Audit Committee also reviews adequacy of 31, 2010, which complies with the requirements of disclosures and compliance with all relevant laws. In Section 292A of the Companies Act, 1956 and Clause addition to these, in compliance with requirements 49 of the Listing Agreement(s) is as under: of Clause 49 of the Listing Agreement, the Audit Name of Directors Category Committee reviews operations of Subsidiary Companies viz., its financial statements, significant Mr. N. C. Jain Non Executive – Independent related party transactions, statement of investments Mr. Ashok Kurien Promoter – Non Executive and minutes of meetings of its Board and Committees. Mr. B.K.Syngal Non Executive – Independent Mr. Rajan Jetley Non Executive – Independent During the year under review, five (5) Meetings of the Prof R.Vaidyanathan Non Executive – Independent Audit Committee were held viz.

Date of Meeting Attendance The role and the powers of the Audit Committee No. of No. of Non- are as per guidelines set out in Clause 49 of the Independent Independent Listing Agreement and provisions of Section 292A Directors Directors of the Companies Act, 1956. The Committee meets 21.04.09 3 1 periodically and reviews: 26.06.09 2 1

Accounting and financial reporting process of the 16.07.09 3 1 Company 22.10.09 4 1 18.01.10 2 1 Audited and un-audited financial results Internal audit reports, risk management policies & report on internal control systems of the Company Taking Entertainment Places Operational Review Governance & Financials 75

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Statutory Auditor, Internal Auditor and Chief Financial During the year under review, Remuneration Officer of the Company are invitees to all meetings Committee met on two occasions, viz: on April 21, of the Committee and the Company Secretary is the 2009 and October 22, 2009. Secretary to the Audit Committee. Details of the remuneration paid to Mr. Punit Goenka, Managing Director & CEO of the Company during the b) Remuneration Committee and Policy year ended March 31, 2010 is as under: The Remuneration Committee of the Company comprises of five (5) Non-Executive Directors, three of Particulars Amount (Rs.) whom are Independent Directors. Mr. N. C. Jain, Non- Salary & Allowances* 28,028,103 Executive Independent Director is the Chairman of the Perquisites 3,473,865 Committee and other members are Mr. B. K. Syngal, Employer’s Contribution to Provident 1,855,800 Non Executive Independent Director, Mr. Rajan Jetley, Fund Non Executive Independent Director, Mr. Ashok Total 33,357,768 Kurien, Non Executive Director and Mr. Laxmi N. Goel, Non-Executive Director. The Company Secretary is * includes provision for incentives for FY 2009-10 the Secretary to the Committee. Remuneration payable to Non-Executive The terms of reference of the Remuneration Committee, Directors inter alia, consists of reviewing the overall compensation During the financial year 2009-10 the Non-Executive policy, service agreements, Performance incentive and Directors were paid sitting fees of Rs. 10,000/- per other employment conditions of Executive Director(s). meeting, for attending the meetings of the Board The recommendations of the Remuneration Committee and Committees thereof, other than Share Transfer are considered and approved by the Board of Directors, & Investors Grievances Committee, within the limits subject to the approval of the shareholders. approved by the Shareholders.

Additionally the Remuneration Committee has been Additionally, as approved by the Members & the delegated the powers to decide on issuance of Stock Central Government, the Non-Executive Directors are Options and administer ZEEL – Employees Stock entitled to remuneration by way of Commission for Option Scheme – 2009 approved by the Members at each financial year up to an aggregate limit of 1% of the 27th Annual General Meeting held on August 18, net profits of the Company. The commission payable 2009. During the year under review, the Remuneration is determined by the Board based inter alia on the Committee has approved grant of 43,40,000 performance of, and regulatory provisions, applicable (convertible into equivalent number of equity shares to the Company. As per the current remuneration of the Company of Re. 1 each) to the Employees of policy, the Company pays equal amount of commission the Company/its Subsidiaries and the Independent to Non-executive Directors on pro rata basis. Directors of the Company. 76 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Report on Corporate Governance (contd.)

Details of the remuneration of the Non-Executive Directors of the Company for Financial year 2009-2010 are as under: (Rs.)

Name of Director Sitting Fees Commission Total

Subhash Chandra 80,000 1,200,000 1,280,000 Laxmi N Goel 40,000 1,200,000 1,240,000 Ashok Kurien 140,000 1,200,000 1,340,000 N C Jain 160,000 1,200,000 1,360,000 B K Syngal 110,000 1,200,000 1,310,000 Rajan Jetley 50,000 1,200,000 1,250,000 Gulam Noon 50,000 1,200,000 1,250,000 M Y Khan 50,000 1,200,000 1,250,000 R. Vaidyanathan 140,000 1,200,000 1,340,000 Total 820,000 10,800,000 11,620,000

Disclosure with respect to Non-Executive Directors on Mr. M. Lakshminarayanan, Executive Vice President other pecuniary relationship – None & Company Secretary is the Compliance Officer of the Company. Within the overall limits permissible under the provisions of Companies Act, 1956 and as authorized During the year under review, Share Transfer and by the Members at the Annual General Meeting held Investors Grievance Committee met four (4) times on September 28, 2005, your Board has, at its meeting on April 6, 2009, July 6, 2009, October 6, 2009 and held on March 22, 2010, approved increase in Sitting January 11, 2010. These meetings were attended by Fees payable to the Non-Executive Directors to Rs. all Committee members. 20,000 per meeting effective April 1, 2010. Details of number of requests/complaints received and resolved during the year ended March 31, 2010, are as c) Share Transfer and Investors Grievance under: Committee Nature of Replied/ The Share Transfer and Investors Grievance Received Pending Correspondence Resolved Committee of the Board comprises of Mr. Ashok Non-receipt Kurien, Non Executive Director as Chairman and Mr. of Dividend 42 42 – N. C. Jain, Non Executive Independent Director as Warrant(s) Member. The Company Secretary is the Secretary of Non-receipt of 10 10 – the Committee. Certificates Letter received Terms of reference of the Share Transfer and Investor from SEBI/Stock 9 9 – Grievance Committee are to supervise and ensure Exchanges efficient transfer of shares and proper and timely Non-receipt of 23 23 – attendance of investors’ grievances. The Committee Annual Report has delegated the power of approving transfer, Total 84 84 – transmission, rematerialisation, dematerialization etc of shares of the Company to the officials of the Secretarial Department. Taking Entertainment Places Operational Review Governance & Financials 77

Statutory Reports Standalone Financials Consolidated Financials

d) Finance Sub-Committee Details of Annual General Meetings held during last 3 With a view to facilitate monitoring and for expediting years are as follows: any fund raising process, the Board of Directors of the Company had constituted a Finance Sub-Committee of Day, Date and Meeting Time of the Venue the Board comprising of Mr. N. C. Jain, Non-Executive Meeting Independent Director as Chairman and Mr. Ashok Kurien, Non-Executive Director and Mr. Punit Goenka, Tuesday, August 27th Managing Director & CEO as its Members. 18, 2009 at AGM Nehru Centre, Nehru 11.00 a.m. Auditorium, Dr. Annie Main function of the Finance Sub-Committee is to Wednesday, Besant Road, Worli, 26th consider and approve financing facilities offered and/ July 23, 2008 at Mumbai 400 018 AGM or sanctioned to the Company by various Banks and/ 11.30 a.m. or Indian Financial Institutions from time to time, in Auditorium, A wing, the form of Term Loans, Working Capital facilities, Ground Floor, Guarantee Facilities, etc., including the acceptance of National Stock Friday, August Exchange of India terms and conditions of such facilities being offered. 25th 17, 2007 at Limited, Exchange AGM 11.30 a.m. Plaza, Plot No. C-1, During the year under review Finance Sub-Committee G-Block, Bandra Kurla met four times on July 29, 2009, August 8, 2009, Complex,Bandra (E), September 14, 2009 and October 27, 2009 which were Mumbai-400 051 attended by all members.

In addition to the above, your Board has constituted During last three Annual General Meetings of the a Corporate Management Committee comprising of Company, the members had passed following Special Senior Executives including Managing Director and Resolutions: CEO of the Company. Main function of the Committee is to review, approve and/or grant authorities for managing day-to-day affairs of the Company within the At 27th Maintainance of Register & Index Annual limits delegated by the Board. of Members of Equity Shares and General Share transfer Register at the office Meeting of Registrar & Share Transfer Agent General Meetings instead of Registered Office of the The 28th Annual General Meeting of the Company Company for the financial year 2009-10 will be held on Friday, Introduction and implementation of October 29, 2010 at 10.30 a.m. at Nehru Centre, Nehru Employee Stock option Scheme Auditorium, Dr. Annie Besant Road, Worli, Mumbai 400 018. 78 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Report on Corporate Governance (contd.)

Disclosures There are no materially significant related party Extension of benefits of Company’s transactions, i.e. transaction material in nature, ESOP Scheme to Employees / Directors of Subsidiary and/or holding between the Company and its promoters, directors companies of the Company or management or their relatives etc., having any potential conflict with interests of the Company at Alteration of Articles of Association of Company large. Transactions with related parties are disclosed elsewhere in the Annual Report. Alteration of Articles of Association of the Company consequent to alteration There has not been any non-compliance by the of Capital clause of Memorandum of Association of the Company Company and no penalties or strictures imposed by SEBI or Exchanges or any statutory authority on any Approval for appointment of Mr. matter relating to capital markets, during the last three Subhash Chandra, Non-Executive Chairman of the Company for holding years. an office or place of profit in Asia TV Limited, UK, a wholly owned foreign SEBI had issued a Show Cause Notice to the subsidiary of the Company Company in 2005 wherein the Company and its At 26th Alteration of Articles of Association Promoters were charged for alleged involvement in Annual market manipulation transactions of Ketan Parekh General and his associates. In connection with this Show Meeting Cause Notice, Hon’ble Whole-time Member of SEBI At 25th None has vide Order dated March 19, 2008,held that the Annual General charges of alleged involvement of the Company and Meeting its Promoters in market manipulation transactions, are not sustainable and that the Company and its Promoter Companies are not directly involved in the All the above resolutions were passed with requisite market manipulation. Therefore any penal actions majority. sought under the Show Cause Notice were dropped. No Ordinary or Special resolutions were passed However, since in the opinion of SEBI, the actions of through Postal Ballot during financial year 2009- the Company and its Promoters gave an impression 10. None of the resolutions proposed at the ensuing of such involvement, the SEBI order cautioned the Annual General Meeting need to be passed by Postal Company and its promoters against any similar actions Ballot. in future.

Additionally, during the financial year 2009-10, as Further, during the year SEBI had issued a Show directed by Hon’ble Bombay High Court, a Court Cause Notice to ETC Networks Limited, a Subsidiary Convened General Meeting was held on December of the Company (now merged with the Company) for 29, 2009, seeking Members’ approval to the Scheme transactions between ETC Networks Limited and its of Arrangement between the Company, Zee News erstwhile promoters during January to April 2001. In Limited and their respective shareholders. The response thereto ETC had sought for Consent Order resolution approving the Scheme was passed by the as per Consent terms and has deposited Consent fee Members with requisite majority. as agreed with SEBI. Taking Entertainment Places Operational Review Governance & Financials 79

Statutory Reports Standalone Financials Consolidated Financials

Compliance with Non-Mandatory requirements language newspaper viz. ‘Punya Nagari (Marathi)’ as The Company has complied with all mandatory per requirements of the Stock Exchange. requirements of Clause 49 of Listing Agreement(s). Official press releases and presentations made to The status of compliance with non-mandatory institutional investors or to the analysts are displayed on requirements of Clause 49 of the Listing Agreement Company’s corporate website, www.zeetelevision.com. are as detailed hereunder: Hard copies of the said disclosures and A. Remuneration Committee correspondences are also filed with the exchanges. The Company has setup Remuneration Committee to recommend/review overall compensation Management Discussions and Analysis Report forming policy, service agreements and other employment part of annual report is annexed separately. conditions of Executive Directors. General Shareholder Information B. Whistle Blower Policy The Board of Directors of the Company approved The required information is provided in Shareholders’ the Whistle Blower Policy, pursuant to which Information Section. employees can raise concern relating to the fraud, malpractice or any other untoward activity or event which is against the interest of the Company and/ or its stakeholders.

C. AUDIT Qualification Company is in the regime of unqualified financial statements.

Means of Communication The Company has promptly reported all material information including declaration of quarterly financial results, press releases, etc. to all Stock Exchanges where the securities of the Company are listed. Such information is also simultaneously displayed immediately on the Company’s corporate website, www.zeetelevision.com. The financial results quarterly, half yearly and annual results and other statutory information were communicated to the shareholders by way of an advertisement in a English newspaper viz. ‘Daily News & Analysis (DNA)’ and in a vernacular 80 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Auditors’ Certificate To, The Members, Zee Entertainment Enterprises Limited

We have examined the compliance of conditions of Corporate Governance by Zee Entertainment Enterprises Limited (‘the Company’), for the year ended March 31, 2010 as stipulated in Clause 49 of the Listing Agreement of the Company with the Stock Exchanges.

The Compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to the procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion of the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has compiled with the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement.

We state that no investor grievances are pending for a period exceeding 30 days against the Company as per the records maintained by the Company.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

For MGB & Co. Chartered Accountant

Registration No. - 101169W Mohan Bhandari Partner

Membership No.12912 Mumbai. Taking Entertainment Places Operational Review Governance & Financials 81

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Shareholders’ Information

1. Date, Time and Venue of Meeting : Annual General Meeting shareholders’ Meeting Day & Date : Friday October 29, 2010 Time : 10.30 a.m. Venue : Nehru Centre, Nehru Auditorium, Dr. Annie Besant Road, Worli, Mumbai – 400 018 2. Financial Year 2009-2010 3. Date of Book Closure Saturday, October 9, 2010 to Tuesday, October 12, 2010 (both days inclusive) 4. Dividend Payment Date On or after October 29, 2010 5. Registered Office Continental Building, 135, Dr. Annie Besant Road, Worli, Mumbai-400 018, India Tel: +91-22-6697 1234 Fax: +91-22-2490 0302/0213 Website: www.zeetelevision.com 6. Listing on Stock The Bombay Stock Exchange Limited (BSE) Exchanges The National Stock Exchange of India Limited (NSE) 7. Stock Code BSE 505537 NSE ZEEL EQ Reuters ZEE.BO (BSE) ZEE.NS (NSE) Bloomberg Z IN (BSE) NZ IN (NSE) 8. ISIN No. Equity - INE256A01028 9. Registrar & Share Sharepro Services (India) Private Limited Transfer Agent 13AB, Samhita Warehousing Complex, Second Floor, Sakinaka Telephone Exchange Lane, Off Andheri -Kurla Road, Sakinaka, Andheri (East), Mumbai-400 072, India. Tel: +91-22-67720400 Fax: +91-22- 28591568 E-mail: [email protected] 10. Investor Relation Officer Mr. Pushpal Sanghavi Zee Entertainment Enterprises Limited Continental Building, 135, Dr. Annie Besant Road, Worli, Mumbai - 400 018, India Tel: +91-22-6697 1234 Fax: +91-22-2490 0302/0213 E.Mail: [email protected] 82 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Shareholders’ Information (contd.)

11. Dividend Last date Date of Due date In addition to the Interim Dividend of Re. 2 per share Financial for Claiming Declaration for transfer declared by the Board on April 20, 2010, the Board Year Ended unpaid of Dividend to IEP fund of Directors have recommended payment of Final Dividend Dividend of Re. 2/- per share on paid up value of Re. 31.03.2005 28.09.2005 03.11.2012 02.12.2012 1 per share i.e. 200% on the paid up capital of the 31.03.2006 28.12.2006 03.02.2014 02.03.2014 Company. 31.03.2007 17.08.2007 22.09.2014 21.10.2014

Final Dividend, if approved by Members at the ensuing 31.03.2008 23.07.2008 28.08.2015 27.09.2015 Annual General Meeting, will be paid to all those 31.03.2009 18.08.2009 23.09.2016 22.10.2016 shareholders whose name appear in the Register of 31.03.2010 Members of the Company, after giving effect to all (Interim 20.04.2010 21.05.2017 20.06.2017 Dividend) valid share transfers in physical form lodged with the Company or its Registrars on or before October 8, 2010 and in the list of beneficial owners furnished by 12. Change of Address National Securities Depository Limited and/or Central Members holding equity share(s) in physical form are Depository Services (India) Limited, in respect of requested to notify the change of address/dividend shares held in electronic form, as at the close of the mandate, if any, to the Company’s Registrar & Share business on October 8, 2010. Transfer Agent, at the address mentioned above. Dividend for the financial year ended March 31, 2003, Members holding equity share in dematerialized form which remains unpaid or unclaimed, will be due for are requested to notify the change of address/dividend transfer to the Investor Education and Protection Fund mandate, if any, to their respective Depository on completion of seven years. The same would be Participant (DP). transferred on or before November 20, 2010.

Members who have not encashed their dividend 13. Share Transfer System warrant(s) for the financial year ended March 31, 2003, Equity Shares sent for physical transfer or for or any subsequent financial year(s), are requested to dematerialization are generally registered and returned seek issue of duplicate warrant(s) by writing to the within a period of 15 days from the date of receipt of Registrar and Share Transfer Agent of the Company. completed and validly executed documents. Members will not be able to claim any unpaid dividend from the Investor Education and Protection Fund or the 14. Dematerialisation of Equity Shares & Liquidity Company once it is transferred to the said fund. Trading in equity shares of the Company became mandatory in dematerialized form, with effect from Information in respect of unclaimed dividend for the April 5, 1999. To facilitate trading in demat form, the subsequent financial years and date(s) when due for Company has made arrangements with both the transfer to Investor Education and Protection Fund is depositories viz. National Securities Depository Limited given below: (NSDL) and Central Depository Services (India) Last date Limited (CDSL). Shareholders can open account with Date of Due date Financial for Claiming Declaration for transfer any of the Depository Participant registered with any Year Ended unpaid of Dividend to IEP fund of these two depositories. As on date 99.70% of the Dividend equity shares of the Company are in the dematerialized 31.03.2003 26.09.2003 01.11.2010 30.11.2010 form. 31.03.2004 28.09.2004 03.11.2011 02.12.2011 Taking Entertainment Places Operational Review Governance & Financials 83

Statutory Reports Standalone Financials Consolidated Financials

15. Splitting of Shares Date of High Court Order : March 19, 2010 On October 25, 1999 Shareholders had approved approving the Scheme splitting of face value of equity shares of the Company from Rs. 10 each to Re. 1 each. The said resolution Date on which Scheme : March 29, 2010 became effective from the start of no-delivery period became effective w.e.f. December 6, 1999. From this day onwards Ratio in which Shares of : 4 Equity Shares of the trading in equity shares of Re.1 each commenced and the Company allotted Company for 19 Equity consequently the equity shares of Rs. 10 each ceased Shares of Zee News to trade on the stock exchanges. Limited held as on April 16, 2010 (Record To all the shareholders who were holding shares in Date announced by physical form, the Company had sent them intimation Zee News Limited) to exchange the old certificates of face value of Rs. 10 each with new certificate of face value of Re. 1 Date of Allotment of : April 20, 2010 each. For the shareholders who were holding shares Shares in demat form, the depositories automatically gave the Date of issuance of : April 29, 2010 effect of splitting of face value of shares by way of a Shares / Credit to Demat Corporate action on December 23, 1999. Account Shareholders who could not exchange their old In respect of the Composite Scheme of Amalgamation certificates earlier for the new certificates and who are and Arrangement between the Company, ETC desirous of exchanging the same, should follow the following procedure: Networks Limited, Zee Learn Limited and their respective Shareholders, inter alia for merger of ETC 1. Write a letter to the Company’s Registrar & Share Networks Limited with the Company with effect from Transfer Agent mentioning: March 31, 2010, the Members may note following • Your intention to split the share certificates; details: • Whether the new share certificates are required in jumbo lot or in market lot. Date of High Court Order : July 16, 2010 2. Attach old share certificates in original, with the letter. approving the Scheme 3. Send the same (preferably through registered post) to the Registrar & Share Transfer Agent at Date on which Scheme : August 30, 2010 the address given above. became effective Ratio in which Shares of : 10 Equity Shares of 16. Issuance of Shares Pursuant to the Scheme of the Company allotted Re. 1 each of the the Arrangement Company for 11 Equity In respect of the Scheme of Arrangement between Shares of Rs. 10 each of ETC Networks the Company, Zee News Limited and their respective Limited held as on Shareholders, for demerger of Regional General September 17, 2010 Entertainment Channel Business Undertaking of (Record Date) Zee News Limited into the Company with effect from January 1, 2010, the Members may note following Date of Allotment of : September 23, 2010 details: Shares 84 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Shareholders’ Information (contd.)

17. Shareholders’ Correspondence The Company has attended to all the investors’ grievances/ queries/ information requests except for the cases where we are constrained because of some pending legal proceeding or court/statutory orders.

The Company endeavors to respond to all letters received from the shareholders within a period of 5 working days.

All correspondence may please be addressed to the Registrar & Share Transfer Agent at the address given above. In case any shareholder is not satisfied with the response or do not get any response within reasonable period, they may approach the Investor Relation Officer at the address given above.

18. Outstanding Convertible Instruments, Conversion Date & Likely Impact on Equity As approved by the Members of the Company at the Annual General Meeting held on August 18, 2009, the Company had instituted an Employee Stock Option Scheme (ZEEL ESOP 2009) under which the Company is entitled to issue Stock Options convertible into 21,700,355 Equity Shares of Re. 1 each.

Under the said ZEEL ESOP 2009 Scheme, the Company has during financial year 2009-10 issued Stock Options convertible into 43,40,000 Equity Shares of Re. 1 each upon exercise by option holder on or after October 22, 2010.

19. Stock Market Data Relating to Shares Listed in India Monthly high and low quotations and volume of shares traded on Bombay Stock Exchange and National Stock Exchange for financial year 2009-2010 are:

BSE NSE Month High (Rs.) Low (Rs.) Volume of High (Rs.) Low (Rs.) Volume of Share Traded Shares Traded

April 2009 142.00 104.65 14743387 142.75 104.50 53083252 May 2009 186.90 114.50 13027128 187.45 114.75 48338057 June 2009 203.50 152.00 6991867 203.90 152.00 29824108 July 2009 199.70 160.00 12980844 199.60 159.55 41404560 August 2009 224.80 175.00 7890729 224.90 174.75 32200197 September 2009 244.80 205.70 9161519 244.50 205.80 29966251 October 2009 261.40 223.90 6397013 261.85 224.10 31792160 November 2009 275.25 226.00 3738182 275.45 223.00 22642867 December 2009 272.00 244.25 2812800 270.90 210.90 18971530 January 2010 292.70 251.70 3783981 303.10 250.55 23807789 February 2010 268.65 244.00 1280732 269.75 243.90 11732510 March 2010 283.75 248.00 2056479 283.85 249.50 19777797 Taking Entertainment Places Operational Review Governance & Financials 85

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20. Relative Performance of Zee Shares Vs. BSE Sensex & Nifty Index

Zee Entertainment Enterprises Limited Closing Price Vs Closing Sensex

300 20000 250 15000 200 150 10000 Price 100 5000

50 Closing SENSEX 0 0 Jul - 09 Oct - 09 Apr - 09 Jun - 09 Jan - 10 Mar - 10 Feb - 10 Nov - 09 Dec - 09 Aug - 09 Sep - 09 May - 09 Month

Zee Entertainment Enterprises LimitedClosing Price Vs Closing NIFTY

300 6000 250 5000 200 4000 150 3000 Price 100 2000 Closing NIFTY 50 1000 0 0 Jul - 09 Oct - 09 Apr - 09 Jun - 09 Jan - 10 Mar - 10 Feb - 10 Nov - 09 Dec - 09 Aug - 09 Sep - 09 May - 09 Month 86 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Shareholders’ Information (contd.)

21. Distribution of Shareholding as on March 31, 2010

No. of Equity Shares Shareholders No. of Shares Number % of holders Number % of Shares Upto 5000 78,072 99.27 9,623,541 2.22 5001-10000 149 0.19 1,132,660 0.26 10001-20000 80 0.10 1,167,952 0.27 20001-30000 27 0.03 658,876 0.15 30001-40000 21 0.03 726,493 0.17 40001-50000 13 0.02 596,720 0.14 50001-100000 48 0.06 3,612,372 0.83 100001 and Above 239 0.30 416,488,497 95.96 78,649 100 434,007,111 100

22. Categories of Shareholders as on March 31, 2010

Category March 31, 2010 % of shareholding No. of shares held Promoters 41.50% 180,105,368 Individuals 2.10% 9,096,124 Domestic Companies 5.09% 22,070,110 FIs, Mutual funds and Banks 22.27% 96,638,149 FIIs, OCBs & NRI 29.04% 126,097,360 100.00% 434,007,111

Zee Entertainment5.09% Domestic Enterprises Companies Limited - Share Pattern as on March 31, 2010 5.09% Domestic Companies

29.04% FIIs / NRIs / OCBs 41.50% Promoters 29.04% FIIs / NRIs / OCBs 41.50% Promoters

2.10% Individuals 22.27% FIS / MF / Bank 2.10% Individuals 22.27% FIS / MF / Bank Taking Entertainment Places Operational Review Governance & Financials 87

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23. Particulars of Shareholding a) Promoter Shareholding as on March 31, 2010

Sr. No. Name of Shareholder No. of Shares held % of shareholding 1 Delgrada Limited 53,554,143 12.34% 2 Jayneer Capital Pvt. Ltd 52,346,604 12.06% 3 Lazarus Investments Limited 11,500,000 2.65% 4 Prajatma Trading Co. Pvt. Ltd 7,574,500 1.75% 5 Essel Infraprojects Ltd (formerly Pan India Paryatan Ltd) 6,400,000 1.47% 6 Premier Finance and Trading Co Ltd 6,176,000 1.42% 7 Ganjam Trading Co. Pvt Ltd 6,016,500 1.39% 8 Briggs Trading Co. Pvt Ltd 4,451,262 1.03% 9 Churu Trading Co Pvt Ltd 3,576,000 0.82% 10 Ambience Advertising Pvt Ltd 2,275,000 0.52% 11 Ashok Kurien 2,042,000 0.47% 12 Laxmi Goel 1,753,000 0.40% 13 Sushila Goel 680,000 0.16% 14 Veena Investment Pvt Ltd 681,000 0.16% 15 Essel Holdings Limited 21,079,259 4.86% 16 Essel Champs Private Limited 100 0.00% Total 180,105,368 41.50%

b) Top ten Public Shareholding as on March 31, 2010

Sr. No. Name of Shareholder No. of Shares held % of shareholding 1 Life Insurance Corporation of India 40,770,666 9.39% 2 HDFC Trustee Company Limited – HDFC Capital Builder Fund 22,167,041 5.11% 3 Oppenheimer Developing Markets Fund 21,392,510 4.93% Reliance Capital Trustee Co Ltd A/c Reliance Media and 4 14,192,733 3.27% Entertainment Fund 5 HDFC Standard Life Insurance Company Limited 9,937,288 2.29% 6 Oppenheimer Global Fund 7,850,584 1.81% 7 FID Funds (Mauritius) Limited 6,707,247 1.55% 8 Norges Bank A/c Government Petroleum Fund 5,305,543 1.22% 9 Birla Sun Life Insurance Company Ltd 4,124,152 0.95% 10 SBI Mutual Fund - Magnum Balanced Fund 3,993,640 0.92% Total 136,441,404 31.44% 88 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Management Discussion and Analysis

The figures have been stated in Rs. X million in the MD&A for better readability instead of Rs. XX thousands as stated in the financial statements.

Investors are cautioned that this discussion contains forward-looking statements that involve risks and uncertainties including, but not limited to, risks inherent in the Company’s growth strategy, acquisition plans, dependence on certain businesses, dependence on availability of qualified and trained manpower and other factors. The following discussion with the Company’s financial statements included herein and the notes thereto:

OVERVIEW Zee Entertainment Enterprises Limited (ZEEL) (BSE Code: 505537, NSE Code: ZEEL.EQ) is India’s largest vertically integrated media and entertainment Company. The Company was formed in 1982.

Zee Entertainment was the first Company to launch a satellite channel in India and from being a single channel fora single geography today operates multiple channels across multiple geographies in different languages and genres. The Company’s programming reaching out to over 500 million viewers across 167 countries.

Zee Entertainment channels include Zee TV (Hindi General Entertainment), Zee Cinema (Hindi Movies), Zee Sports, Ten Sports (sports including Cricket), Zee Café (English Entertainment), Zee Studio (English Movies), Zee Trendz (Fashion & Life Style), Zing (Music and Lifestyle), ETC Music (Hindi Music), ETC Punjabi (Regional language), Zee Classic (Old Hindi movies), Zee Action (Action-based Hindi movies), Zee Premier (New Hindi movies), Zee Jagran (Alternative Lifestyle), Zee Smile (Niche Hindi General Entertainment) and recently merged Regional Channels like Zee Marathi, Zee Bangla, Zee Kannada, Zee Telugu, Zee Talkies and 9X.

MEDIA AND ENTERTAINMENT INDUSTRY A buoyant economy led to the Indian media and entertainment industry growing at a quick pace over the last few years. Advertising revenues continued to outperform the world growth average and digitization ensured that corrections were brought into the subscription revenues model.

However, year gone by was a unique one for the world economy at large and growth plans across businesses were brought under check while rationalizing spends to grapple with unprecedented slowdown. Taking Entertainment Places Operational Review Governance & Financials 89

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An ever increasing ad spend to GDP ratio, rapid adoption of DTH and digital pay television services, favourable trends from television heavy advertisers lead the revival of the sector from this pressure situation in the second half of the fiscal 2010 which is likely to rally in the coming years

The new era of digitization has seen DTH adoption going up to 20 million pay DTH households as of March 2010, an 80% growth over the last year. With more number of players foraying into the DTH market and heavier investments into consumer education, the DTH industry is estimated to grow by another 9-10 million households this year alone. Established broadcasters with emphasis on subscription revenues are likely to be the biggest beneficiaries from this expansion going forward.

India has been relatively lesser impacted by the upheaval in the world economic situation, yet the widespread uncertainty has led to a slowdown in advertising spends.

BUSINESS PROFILE Zee is an integrated media and entertainment Company engaged primarily in broadcasting and content development, production and its delivery via satellite. The Company has 23 channels that serves widest array of content choices in India and is the leading broadcaster across the country as also the pioneer in the international markets for Indian content.

Zee TV The flagship channels Zee TV operates in the Hindi General Entertainment genre. Over the last year, easy liquidity in capital markets and growth prospects of Indian media had lead to the launch of various new channels, especially in the Hindi General Entertainment space. New players were attracted to the genre owing to its popularity among viewers and the resultant advertising spends it attracts through giving little emphasis on their breakeven horizons and profitability.

Nevertheless, with the launch of new players, a lot more choice was available to the viewers, the quantity of GEC content being produced went up. This in turn also resulted in increased cost of marketing and distribution within the GEC genre. Since cable distribution in India is predominantly in analogue mode, getting carriage on cable networks was a challenge for most. As a result, the channels had to pay sizable amounts as carriage fees.

The cost structure of new channels was thus very different as compared to established players. While new channels spent excessively across all cost heads, creating unviable operating plans, the liquidity scenario also changed for the worse and but a brake in the plans of some new players. 90 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Management Discussion and Analysis (contd.)

The fragmentation in viewership brought with it some pressure on advertising for the genre. New broadcasters offered entry pricing on new inventory, which resulted in lower realization and yields. Subscription revenues were also under pressure, with all new entrants offering long free-view windows.

While the initial flurry of spends did bring with it short-term viewership spikes, most of the channels started to plateau out on ratings. Monetize-able ratings eluded new players, even as established incumbents continued to garner a larger pie of the relevant viewership and advertising revenues hence. The graph below is indicative of the competitive Hindi GEC space and primetime ratings of each of the channels over the last four years, showing the growing strength of Zee TV versus other established players in the genre.

5.0 2006 2007 2008 2009 4.5

4.0

3.5

3.0

2.5 TVRs 2.0

1.5

1.0

0.5

0.0 Zee TV Star Plus Colors Sony Star One Sahara One SAB Imagine TV 9X

Zee TV continued to maintain its dominance in the genre In Hindi Movie Genre, it has 4 channels viz. Zee even as other channels lost market share and delivered Cinema, Zee Premier, Zee Action and Zee Classic. an average channel share of 17% across the year. The Zee Cinema has been a leader in its genre from the encouraging part for the channel was that while other time of its inception and commanded 33% weekly existing players lost channel share to new competitors, average channel share during the year. The channel the channel was the least effected by the upheaval that has the largest film library in the country and is a strong surrounded it. During the year, the channel launched favourite with the viewers as also the advertisers. various new successful shows including ‘Choti Bahu’, The Company’s sports offering includes 2 channels viz. Agle Janam Mohe Bitiya Hi Kijo’, ‘Dance India Dance’, Zee Sports and Ten Sports. With telecast rights to 5 ‘Do Sahelia’, ‘Jhansi Ki Rani’, etc. These shows met with cricket boards, which ensure coverage of cricket of all instant success and broke into the top 50 shows slot. test playing countries, and over hundred days of cricket per year along with rights to exciting properties such as Leadership across different Genre UEFA cup football, WWE wrestling, US Open Tennis, Apart from its flagship channel Zee TV, the Company has etc. tied up, the sports business has emerged as a strong a dominant presence across different segments in Indian segment of the Company’s revenues, contributing to broadcasting space. over 14% of the Company’s top line this year. Taking Entertainment Places Operational Review Governance & Financials 91

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Zee Café, Zee Studio and Zee Trendz channels are Education Company’s offering to the English speaking audiences For India to achieve its target of GDP growth, it needs in the country. Zee Café has the rights to the latest to harness all its Resources – the biggest one being current series programming of super-hit shows while manpower. Sadly, our manpower today is not equipped Zee Studio has tied up with leading studios from across to take on the challenge of leading India to its destiny. the globe. The channels continue to drive in strength 36% of them are illiterate and the ones, who are certified to network subscription bouquet. literate, are barely employable. Therefore, organized Zee Music, the music channel offering of the Company private initiatives are gaining momentum in India’s lucrative was rebranded to Zing during the course of the year. education market. The content on Zing will revolve around the world of music, movies and celebrities. Zee Interactive Learning Systems (ZILS) is the education division of ETC Networks Ltd. ZILS’s purpose Zee Marathi, Zee Talkies, Zee Bangla, Zee Telugu, is to improve Human Capital via quality education and Zee Kannada are regional language offerings and are development as also helps individuals (children and youth) carrying significant market share in their respective realize their unique potential through our chain of Pre- markets. schools, Schools, Youth Institutes and Online ventures. ZILS plans to make substantial investments in developing Global Presence new education centres for the children and youth through The Company has access to more than 500 million viewers organic and inorganic routes. globally and broadcasts to over 167 countries worldwide. ZILS runs India’s No.1 chain of pre-schools, Kidzee with Internationally, subscription is a key driver of revenues for more than 415 operational pre-schools in more than 275 any broadcaster and international subscription revenues cities. Kidzee is a pioneer in organized and standardized contributed to over 24% of Zee Entertainment’s total pre-schooling in the country. ZILS has also ventured into revenues in this financial year. The Company also forayed K12 schools with Kidzee High, India’s only chain of Higher into new markets with the launch of local language channels Secondary schools with an integrated approach to Learner in Russia, Indonesia, Malaysia, Saudi Arabia. The offering Centric Education. is of the existing library either subtitled or dubbed into the local language to cater to the non South Asian audiences For youth, ZILS runs 2 vocational institutes in Mumbai in as well. addition to more than 50 ZedCA centres across the country. ZedCA centres impart IT training. Zee Institute of Media Arts Films Business (ZIMA) is a TV and Film training institute in Lokhandwala, Mumbai that offers diploma courses in Direction, Acting, During the year, the Company’s movie production & Sound Editing, Production and Cinematography. Zee distribution business suffered a loss of Rs. 3.17 mm. The Institute of Creative Animation (ZICA) is a premier Company is now revising its strategy to go for this business animation institute at Esselworld, Mumbai that trains youth by concentrating on Regional film markets. in classical 2D and modern 3D animation. 92 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Management Discussion and Analysis (contd.)

To bring in better management focus, Education business realized by the Company for these consumers grew undertaking including all its assets, properties and liabilities 93% over the last year. is demerged from the Company to a resulting Company Zee Learn Limited at book value with effect from April 1, iii) Rationalize on costs across different heads 2010. towards the latter half of the year The belief at the Company has always been that BUSINESS STRATEGY higher spends will not necessarily result in sustained The year gone by can be classified as two distinct parts: incremental viewership. Even in the wake of the first half from April to September and the second half competition, the network maintained its cost structures from October to March. While the first half saw the fallout though with increased competition our costs also impact on advertising revenue due to economic slowdown moved up. The costs were however brought under witnessed during 2008-2009, second half saw a resurgent check towards the fourth quarter of the year and are economy and higher ad spend. expected to further be brought under check going forward. The Company cut back on expansion plans The key elements of Zee’s strategy during the year were (i) such as Zee Next and Zee Entertainment Studios. to take appropriate steps to safeguard its leadership position Better negotiations with suppliers, efforts on manpower in a fiercely competitive environment (ii) to concentrate rationalization and stricter control on distribution on additional revenues from digital pay platforms (iii) spends will help in further keeping costs under check. rationalize on costs across different heads, especially towards the latter half of the year (iv) fortify its expansion iv) Fortify its expansion in the international in the international markets (v) maintain consistently high markets standards of corporate governance. While the network launched local language channels across various new territories in the previous fiscal, i) Appropriate steps to safeguard its leadership this fiscal saw the consolidation on this front, with the position in a fiercely competitive environment success of Zee Aflam for the Middle East region and Over the years, Zee Network has been the only Zee Music in the UK. The success of these channels network to gain viewership share in the top 3 television has given the management confidence that low cost networks of the country. The launch of new shows experiments such as these are an innovative way of across network channels along with the tie up of cricket expanding network strengths. rights and current series rights of programmes has helped ensure that in a highly fragmented environment, v) Corporate Governance the network maintained and grew its dominance. Zee firmly believes that good governance is critical to sustaining corporate development, increasing ii) Concentrate on additional revenues from productivity and competitiveness and creating digital pay platforms shareholder wealth. The governance process India is a fast digitizing market and the consumer should ensure that the available resources are shift towards digital services is exhibited through utilized in a manner that meets the aspirations of the rampant expansion from 6 million pay DTH all its stakeholders. Your Company’s essential households at the beginning of the fiscal to 12 million charter is shaped by the objectives of transparency, pay DTH households at the end of it. The Company professionalism and accountability. The Company gained substantially through this growth and revenues Taking Entertainment Places Operational Review Governance & Financials 93

Statutory Reports Standalone Financials Consolidated Financials

continuously endeavours to improve on these aspects ideas and experience that this diversity provides. The on an ongoing basis. work environment is stimulating and development of core competencies through format training, job rotation While the increasing emphasis on transparency and and hands on training is an ongoing activity. accountability, standards have been set by various governing bodies on disclosure as well as judiciousness RISK FACTORS in conduct. Zee has always tried to go a step further in this direction. Competition from other players The Company operates in highly competitive environment OTHER COMPANY INFORMATION that is subject to innovations, changes and varying levels of resources available to each player in each segment of Zee Entertainment Enterprises Limited business. 1. Internal Control Systems The Company has in place adequate internal control Ever changing trends in Media sector systems, commensurate with its size and nature of It may not be possible to consistently predict changing operations so as to ensure smoothness of operations audience tastes. People’s tastes vary quite rapidly along and compliance with applicable legislation. The with the trends and environment they live in. This makes Company has a well-defined system of management it virtually impossible to predict whether a particular show reporting and periodic review of businesses to ensure or serial would do well or not. With the kind of investments timely decision-making. It has an internal audit team made in ventures, repeated failures would have an adverse with professionally qualified financial personnel, which impact on the bottom line of the Company. conducts periodic audits of all businesses to maintain a proper system of checks and control. Cost of programming mix might affect its Bottom line The management information system (MIS) forms The urge to compete and provide the best content to an integral part of the Company’s are monitored and viewers, Zee would have to incur high expenditure to controlled. Any material change in the business provide an impetus on its programming front from time to outlook is reported to the Board. Material deviations time. from the annual planning and budgeting, if any, are The increase in costs might not necessarily perk up its reported to the Board on quarterly basis. An effective revenues in the same proportion. budgetary control on all capital expenditure ensures that actual spending is in fine with the Capital Budget. Investments in new channels 2. Human Resources The Company may from time to time launch new channels. The Company seeks, respects and values the diverse Content for these channels is obtained from its existing qualities and backgrounds that its people bring to it library as well as from programmes acquired in the normal and is committed to utilizing the richness of knowledge, course of its business. The success of any new channel 94 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Management Discussion and Analysis (contd.)

depends on various factors, including the quality of Sluggish consumer uptake in the international programming, price, extent of marketing, competition etc. markets There can be no assurance that the Company will be as Zee has been a pioneer in the international markets and successful in launching new channels as it has been the has the highest market share amongst all South East Asian case of its existing channels. broadcasters across Europe and USA. Indian content in these markets serves the preference of a niche audience Weakened Macroeconomic Environment takes and Zee has strong relations with distribution platforms longer than expected to recover in these markets giving management the confidence that The Company believes that the economic slowdown is the Company will retain market share in key geographies. now reversed with strong growth in the first half of the fiscal In the given slowdown, consumers may find it difficult to 2010 and that an upward trend will continue with regard upgrade their packages and the value growth from these to spends by the advertisers. However, a longer recovery markets may get affected. period may lead to delayed uptake on advertising spends and an impact on the Company’s strategy going forward. Cannibalization of analogue cable revenues due to increased digital pay revenues Delay in DTH/CAS rollouts resulting in slower ramp The television distribution system in India is primarily up in pay revenues analogue in nature and continues to be impacted by the The uptake of pay digital services by subscribers has been rampant under-declaration and piracy by the last mile a very encouraging sign for all broadcasters. Internationally cable operators. With the advent of digital pay TV services most broadcasters derive a greater share of their revenues such as DTH and digital cable, a clear shift in consumer from the subscription revenues whereas in India the preference has emerged with all of the expansion in the under-declaration in the analogue cable system has led cable and satellite adoption coming on the back of these to broadcasters being more dependant on advertising digital services. Though analogue cable is still under- revenues, which tend to cyclical in nature and more affected reported, this expansion of digital DTH services may lead by the macro economic factors. The industry expects pay to cannibalization of analogue cable revenues in the near digital services to grow at over 50% CAGR in the next three term. years and Zee is likely to benefit heavily from this rapid growth. A slowdown in growth of digital services may lead Increase in cost of acquisition for some of the key to incremental profit margins being impacted. sports properties While a significant amount of rights have been signed on Increased competitive environment in the Hindi by the Company for leading sports properties, any future General Entertainment Space contracts may be at higher costs, which may put pressure The Hindi GEC genre is amongst the key genres for all on margins of the Company. advertisers and with the increased competition in the space, the Company’s revenues may be at risk. Though The Company may be exposed to foreign exchange Zee TV has been maintaining its share of viewership and rate fluctuations off late growing it with new launches, the channel may be The Company receives a significant portion of its revenues the risk of losing revenues. and incurs a significant portion of its expenses in foreign currencies, particularly US dollars and UK pounds. Accordingly, the Company is exposed to fluctuations in the Taking Entertainment Places Operational Review Governance & Financials 95

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exchange rates between those currencies and the Rupee, Expenditures the Company’s reporting currency, which may have a Total expenditure decreased by Rs. 429.5 million, or substantial impact on its revenues and expenses. 3%, from Rs. 16,292.7 million in 2009 to Rs. 15,863.2 million in 2010. This saving in cost was principally a FINANCIAL RESULTS result of reduction in Operational Costs, Selling and Personnel cost. Consolidated Financials A. Results of Operations Operational Cost We have provided a comparison between Zee Operational cost reduced by Rs. 357.6 million, or 4%, Entertainment (Audited) figures for 2009-10 and Zee from Rs. 9,809.6 million in 2009 to Rs. 9,452 million Entertainment (Audited) figures for 2008-09 in 2010. Reduction in operating cost is mainly due to saving in programming cost, lower Film Production Revenue Costs, less Sports events.

Total revenue decrease by Rs. 127.4 million or 1% Personnel Cost from Rs. 23,345.3 million in 2009 to Rs. 23,217.9 Personnel cost reduce by Rs. 67.8 million, or 3%, from million in 2010. Rs. 2,031.1 million in 2009 to Rs. 1,963.3 million in Sales and Services 2010. This reduction is mainly on account of salary rationalization and right sizing of manpower effected Revenue from sales and services increased Rs. 224.7 during the year. million, or 1%, from Rs. 21,773.1 million in 2009 to Rs. 21,997.8 million in 2010. Advertisement Revenue Administrative and Other Expenses has recorded a growth of 1 % from Rs. 10,592.6 Administrative and Other expenses increase by million to Rs. 10,669.7 million. Subscription Revenue Rs. 252.5 million or 14% from Rs. 1,860.2 million to showed a growth of 9% from Rs. 9,037.6 million to Rs. Rs. 2,112.7 million. This is mainly due to additional 9,868.8 million. Other Sales & Services decreased by provision for doubtful debts during the year. Rs. 683.6 or 32% from 2,142.9 million to Rs. 1,459.3 million due to lower income from Film Production and Selling and Distribution Expenses distribution and discontinuation of Agency commission Selling & Distribution expenses reduce by Rs. 256.4 on Ad Sales done for Zee News Limited. million or 10% from Rs. 2,591.6 million in 2009 to Rs. 2,335.2 million in 2010. This is mainly due to lower Other Income spend on advertising and marketing expenses. Other income had reduced by Rs. 352.1 million, or 22%, from Rs. 1,572.2 million in 2009 to Rs. 1,220.1 million Operating Profit in 2010. Other income in 2009 included exceptional Operating profit increased by Rs. 302.1 million, or 4%, income on account of profit on sale of investment in from Rs. 7,052.6 million in 2009 to Rs. 7,354.7 million subsidiaries and associates Rs. 196.5 million. in 2010. The operating margin has marginally gone up from 30% in 2009 to 32% in 2010. This is primarily 96 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Management Discussion and Analysis (contd.)

because of saving in costs incurred during the year on Share of Results of Associates New Channel Zee Next, Film Production & Distribution Share of losses in associates decreased Rs. 17.7 Business and Sports event Telecast rights. million from profit of Rs. 1.4 million in 2009 to loss of Rs. 16.3 million in 2010. Financial Expenses Financial expenses reduce by Rs. 1,007.7 million or Minority Interest 75%. from Rs. 1,339.1 million to Rs. 331.4 million. Minority interest receivable was at Rs. 195.2 million in Reduction in Finance cost is mainly due to cut on 2010. This includes share of minorities of ETC, Zee forex loss on derivative transaction to Rs. 27.8 million Turner, Taj TV Limited. in 2010 as against Rs. 443.5 million in 2009 and also repayment of high cost debts. Net Profit After Tax Net profit after tax increased by Rs. 1,220.8 million Depreciation and Amortisation or24%, from Rs. 5,123.6 million in 2009 to Rs. 6,344.4 Depreciation and amortization reduce by Rs. 24.9 million in 2010. The Net Profit margin in 2010 was million, or 8%, from Rs. 310.3 million in 2009 to Rs. 27_% against 22% in 2009. 285.4 million in 2010. A. Financial Position Profit Before Tax Profit before tax increased by Rs. 1,308.9 million or Consolidated Financial Position as on March 31, 2010 24%, from Rs. 5,429 million in 2009 to Rs. 6,737.9 as compared to March 31, 2009.

million in 2010. As per the scheme of arrangement approved by High Provision for Taxation Court, RGEC undertaking of Zee News Limited w.e.f. January 1, 2010 and 9X business undertaking of 9X Provision for taxation increased Rs. 364.6 million, Media Pvt. Ltd. and ETC Network Limited w.e.f. March from Rs. 207.9 million in 2009 to Rs. 572.5 million in 31, 2010 were merged with parent Company and the 2010. During the year Company has received a refund related Assets and Liabilities were transferred/adjusted of taxes paid in earlier year amounting to excess pursuant to the scheme of arrangement. Hence the provision for tax Rs. 284.1 million. Provision for current previous year figures are not comparable. tax of parent Company for the year has been made under Minimum Alternate Tax (MAT) as per provisions Sources of Funds of Section 115JB of the Income-Tax Act, 1961 for Share Capital, Reserves & Surplus current year Tax Provision has been Rs. 1145 million During the year, on allotment of share upon merger of at Effective Tax Rate of 17% in 2010 as against 29% in ETC Networks Ltd., RGEC undertakings of Zee News 2009. Ltd. and business undertaking of 9X Media Pvt. Ltd. Profit After Tax and Before Minority Share Capital of Company increased by Rs. 55.03 Interest/Share of Profits (Losses) in million to Rs. 489 million. Associate Pursuant to the Scheme of arrangement approved Profit after tax and before minority interest/share of by the shareholders of the Company and by the profits (losses) in associates increased Rs. 944.4 Honorable High Court, Mumbai, RGEC undertaking million from Rs. 5,221.1 million in 2009 to Rs. 6,165.5 of Zee News Limited have been merged in to the million in 2010. Company with effect from January 1, 2010. Similarly, ETC Networks Ltd. and 9X business undertaking of 9X Taking Entertainment Places Operational Review Governance & Financials 97

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Media Pvt. Ltd. respectively with effect from March 31, Investments 2010. Accordingly the deficit on account of transfer, The Investments of the Company were valued at Rs. cancellation of investment and intercompany loans 3,202.7 million on March 31, 2010 as compared to Rs. and advances is adjusted against Securities Premium 1,271.1million on March 31, 2009, an increase of Rs. Account or General Reserve as per scheme. 1,931.6 million over 2009.

Loan Funds During the year Company has invested surplus cash of The total Loan funds of the Company reduced from Rs. Rs. 2,000 million in to Short Term Deposits and NCDs. 5,756.9 million as on March 31, 2009 to Rs. 1,194.8 Deferred Tax Assets million as on March 31, 2010. This reduction in Loan Deffered tax assets (net of liabilities) is Rs. 132.6 Funds is mainly on account of repayment of High Cost million in 2010 as against Rs. 112.8 million in 2009. Debts. It includes Rs. 600 million of loan transfered pursuant to scheme of arrangement. Net Current Assets The Net current assets has decreased by Rs. 4,673.7 Application of Funds million during the year ended March 31, 2010 from Fixed Assets Rs. 21,223 million on March 31, 2009 to Rs. 16,549.3 During the year, the Company’s Gross Fixed Assets million on March 31, 2010. block increased by Rs. 1048.3 Million. This increase is mainly on account of Goodwill arising out of acquisition Current Assets of additional 32.2% shareholding in Taj India Limited, During the year the current assets decreased by Rs. Mauritius resulting into a Goodwill of Rs. 1,227 million. 2,636.8 million from 27,026.3 million as on March 31, Further, there has been addition to New Building 2009 to Rs. 24,389.5 as on March 31, 2010. premises, additional studio, production equipment and Current Liabilities uplinking facility at NOIDA and at Taj TV Dubai. During the year the current Liabilities and Provisions The Net Block increased Rs. 1,055.8 million from Rs. increased by Rs. 2,036.8 million from Rs. 5,803.3 17,423.1 million as on March 31, 2009 to Rs. 18,478.9 million as on 2009 to Rs. 7,840.1 million as on March million as on March 31, 2010. This increase is on 31, 2010. account of increase of Gross Fixed Assets. Inventories Capital Work-in Progress of Rs.1,108.5 million includes Programme/Film rights held by the Company increased Rs. 779.6 million towards rights for managing School from Rs. 4,576.3 million on March 31, 2009 to Rs. for an Education Business and Rs. 237 million for 4,712.6 million on March 31, 2010. This increase was Building under constructions. mainly on account of acquisition of film rights, Higher Programming and Sports events rights acquired during the year. 98 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Management Discussion and Analysis (contd.)

Other The inventories of the Company as on March Provisions 31, 2010 were at Rs. 42 million as against Rs. 43.9 Provisions made have increased from Rs. 1,485.7 million as on March 31, 2009. These inventories million as on March 31, 2009 to Rs. 2,441.2 million as mainly consist of raw tapes, cassettes & discs and on March 31, 2010. other stores & spares. Miscellaneous Expenditure (to the extent not Sundry Debtors written off or adjusted) As on March 31, 2010 Sundry Debtors net off provision Miscellaneous Expenditure (to the extent not written for Doubtful Debts & Bad Debts written off, stood at off or adjusted) reduced by Rs. 44 thousand from Rs. Rs. 7,487.8 million as against Rs. 6,436.5 million 51 Thousand on March 31, 2009 to Rs. 7 Thousand as as on March 31, 2009. This increase is on account on March 31, 2010. of acquisition of RGEC Undertaking of Zee News Limited and commensurate to the increase in scale of Stand-Alone Financials operations. The age of Net Debtors is 120 days of A. Results of Operations sales in 2010 as against 107 days of sales in 2009. Non-Consolidated Financial Information for the Year Cash and Bank Balances Ended March 31, 2010 compared to the Year Ended The cash and bank balances lying with the Company March 31, 2009. as on March 31, 2010 was Rs. 5,864.4 million as As per the scheme of arrangement approved by High against Rs. 1,926.3 million on March 31, 2009. Court, RGEC undertaking of Zee News Limited w.e.f. Loans and Advances January 1, 2010 were merged w.e.f. March 31, 2010 Loans given reduced by Rs. 7,570.2 million from Rs. hence the previous year figures are not comparable. 8,862 million on March 31, 2009 to Rs. 1,291.8 million

on March 31, 2010. Trade Advances have decreased Total Revenue Total revenue increased Rs. 695.9 million, or 5% from by Rs. 1,019.9 million from Rs. 5,056.4 million on 13,153.3 million to Rs. 13,849.2 million due to merger March 31, 2009 to Rs. 4,036.5 million on March 31, of RGEC business and increase in Broadcasting 2010. Trade Advances are given mainly for Content revenue from existing businesses. Acquisitions and film rights. The deposits given have increased from Rs. 168.7 million on March 31, 2009 to Sales & Services Rs. 171 million on March 31, 2010. Revenue from Sales & Services increased Rs. 685 million, or 6% from Rs. 12,102.4 million to Rs. Due to the above changes, the total of loans, advances 12,787.4 million. Major contributor being broadcasting and deposits has decreased by Rs. 7,764.8 million revenue on account of better advertisement revenue from Rs. 14,087.1 million on March 31, 2009 to Rs. on its channel. Subscription Revenue also has seen 6,322.5 million on March 31, 2010. significant improvements. Current Liabilities and Provisions Interest & Other Income Current Liabilities and Provisions have increased by Interest & Other income increased by Rs. 10.9 million Rs. 2036.8 million during the year. or 1% from Rs. 1,050.9 million to Rs. 1,061.8 Million in Current Liabilities 2010. Current liabilities on March 31, 2010 were at Rs. 5,398.9 million up from Rs. 4,317.5 million on March 31, 2009. Taking Entertainment Places Operational Review Governance & Financials 99

Statutory Reports Standalone Financials Consolidated Financials

Total Expenditure Financial Expenses Total expenditure decrease by Rs. 1017.1 million or Financial expenses reduce by Rs. 603.5 million or 77%. 12% from Rs. 8,493.4 million to Rs. 7,476.3 million. From Rs. 778.7 million to Rs. 175.2 million. Reduction The major reduction to this is in Programming Cost and in Finance cost is mainly due to cut on forex loss on Personnel Cost. derivative transaction to Rs. 27.8 million in 2010 as against Rs. 443.5 million in 2009 and repayment of Operational Cost high cost debts. Operational cost decreased by Rs. 773.9 million, or 15%, from Rs. 5,030.6 million in 2009 to Rs. 4,256.7 Depreciation and Amortisation million in 2010, reduction is mainly attributable to cost Depreciation reduces by Rs. 5 million, or 4%, from Rs. of sports events and overall reduction in programming 119.2 million to Rs. 114.2 million. cost. Profit Before Tax Personnel Cost Profit before tax increase by Rs. 2,295.7 million or Personnel cost reduce by Rs. 109.5 million, or 12%, 61%, from Rs. 3,787.7 million in 2009 to Rs. 6,083.4 from Rs. 924.1 million in 2009 to Rs. 814.6 million in million in 2010. 2010. This reduction is mainly on account of salary rationalization and right sizing of manpower effected Provision for Taxation during the year. As a % of sales, the same was 6% in Provision for taxation reduced by Rs. 227.9 million 2010 as against 7% in 2009. from Rs. 1,324.4 million. Current year includes Rs. 313 million towards excess provision for tax of earlier Administrative & Other expenses years written back. Provision for current tax has been Administrative and Other expenses increase by Rs. made under Minimum Alternate Tax (MAT) as per 175.8 million or 30% from Rs. 595.8 million to Rs. provisions of Section 115JB of the Income-Tax Act, 771.6 million. This is mainly due to additional provision 1961 and recognized the MAT credit entitlement of for doubtful debts during the year. Rs./Thousand 288,424.

Selling & Distribution expenses Profit After Tax for the Period Selling & Distribution expenses reduce by Rs. 309.3 Profit after tax for the year increased by 80% to Rs. million or 16% from Rs. 1,942.8 million in 2009 to Rs. 5,588.4 million from Rs. 3,097.4 million. 1,633.5 million in 2010. This is mainly due to lower spend on advertising and marketing expenses.

Operating Profit Operating profit increased by Rs. 1,713 million, or 37%, from Rs. 4,660 million in 2009 to Rs. 6,373 million in 2010. The increase in operating margin has mainly come from reduction in operating cost. 100 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Management Discussion and Analysis (contd.)

B. Financial Position Application of Funds Non-Consolidated Financial Position as on March 31, Fixed Assets 2010 as compared to March 31, 2009. The Net Block increased Rs. 184.1 million from Rs. 1,399.6 million as on March 31, 2009 to Rs. 1,583.7 As per the scheme of arrangement approved by million as on March 31, 2010. Pursuant to the scheme High Court, RGEC undertaking of Zee News Limited of arrangement, Net Block aggregating to Rs. 268.5 w.e.f. January 1, 2010 and 9X business undertaking million have been added. of 9X Media Pvt. Ltd. and ETC Network Limited were merged w.e.f. March 31, 2010 and the related Assets Investments and Liabilities were transferred/adjusted pursuant to Investments have increased from 13,496.1 million in the scheme of arrangement. Hence the previous year 2009 to 15,319.3 million in 2010. figures are not comparable. During the year Company has invested surplus cash of Sources of Funds Rs. 2,000 million in to Short Term Deposits and NCDs. Share Capital, Reserves & Surplus Further, Pursuant to the scheme of arrangement During the year, on allotment of share upon merger following are the effects/adjustments to investments: of ETC Networks Limited, RGEC undertakings of Zee 4,889,589 Equity Shares of Rs. 10/- each of ETC News Limited and business undertaking of 9X Media Network Ltd. have been cancelled on merger of ETC Private Limited Share Capital of Company increased Network Ltd. in to Company. Investment aggregating by Rs. 56.3 million to Rs. 489 million. Rs. 95.1 million, majorly in Mutual Funds has been Pursuant to the Scheme of arrangement approved transferred to the Company. by the shareholders of the Company and by the Net Current Assets Honorable High Court, Mumbai, RGEC undertaking The Net current assets have increased from Rs. of Zee News Limited have been merged in to the 10,020.7 million in on March 31,2009 to Rs. 11,379 Company with effect from January 1, 2010. Similarly, million largely due to increase in inventory and Debtors. ETC Networks Ltd. and 9X business undertaking of 9X Media Pvt. Ltd. respectively with effect from March Current Assets 31, 2010.Accordingly the deficit on account of transfer, The Net current assets have increased from Rs. cancellation of investment and intercompany loans 10,020.7 million in on March 31,2009 to Rs. 11,379 and advances is adjusted against Securities Premium million largely due to increase in inventory and Debtors. Account or General Reserve as per scheme. Inventories Loan Funds Programme/Film rights held by the Company increased Total loan funds as on March 31, 2010 stood at Rs. from Rs. 3,177.5 million on March 31, 2009 to Rs. 1,189 million down from Rs. 1,709.4 million mainly due 4,489.3 million on March 31, 2010. Programmes of to repayment of certain long term debt during the year. Rs. 34.7 million have been transferred pursuant to the It includes Rs. 1,175.5 million of loans transferred Scheme of Arrangement. pursuant to scheme of arrangement. Taking Entertainment Places Operational Review Governance & Financials 101

Statutory Reports Standalone Financials Consolidated Financials

Sundry Debtors Current Liabilities and Provisions Sundry Debtors have increased by Rs. 1,117 million to Current Liabilities and Provisions have increased by Rs. 4,633.8 million from Rs. 3,516.8 million last year. Rs. 1969.3 million during the year. Debtors of Rs. 247.9 million have been transferred/ Current Liabilities adjusted pursuant to the Scheme of Arrangement. Current liabilities on March 31, 2010 are at Rs. 3,833.8 Cash and Bank Balances million up from Rs. 2,842 million on March 31, 2009. The cash and bank balances lying with the Company, Provisions as on March 31, 2010 was Rs. 3,002.9 million as Provisions made have increased from Rs. 1,402.1 against Rs. 1,104.3 million on March 31, 2009. million as on March 31, 2009 to Rs. 2,379.6 million as Loans and Advances on March 31, 2010. There was a reduction in loans and trade advances Miscellaneous Expenditure (to the extent not written given from Rs. 6,448.9 million on March 31, 2009 to off or adjusted) Rs. 5,422.4 million on March 31, 2010. Loans and Miscellaneous Expenditure (to the extent not written Advances of Rs. 1,206.5 million have been transferred off or adjusted) was at Rs./Thousand 2 on March 31, pursuant to the Scheme of Arrangement. 2010. 102 Zee Entertainment Enterprises Limited | Annual Report 2009-10

financial statements

103 Auditors’ Report 104 Annexure to the Auditors’ Report 106 Balance Sheet 103-138 107 Profit and Loss Account STANDALONE 108 Schedules 117 Notes FINANCIALS 136 Balance Sheet Abstract 137 Cash Flow Statement

139 Five Years Financial Highlights 140 Performance Ratios - an Analysis

141 Auditors’ Report 142 Balance Sheet 141-172 143 Profit and Loss Account 144 Schedules CONSOLIDATED 152 Notes FINANCIALS 170 Cash Flow Statement Taking Entertainment Places Operational Review Governance & Financials 103

Standalone Financials Consolidated Financials

Auditors’ Report

To The Members, Zee Entertainment Enterprises Limited

1. We have audited the attached Balance Sheet of Zee these financial statements and resultant surplus of Entertainment Enterprises Limited (“the Company”) as at Rs./Thousand 504,515 is taken to General Reserve March 31, 2010, and also the Profit and Loss account and the and demerger of Education business undertaking as Cash Flow statement for the year ended on that date, annexed on April 1, 2010, hence not given in these financials thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express 5. Further to our comments in the annexure referred to in an opinion on these financial statements based on our audit. paragraph (3) above, we report that: a) We have obtained all the information and explanations, 2. We conducted our audit in accordance with the auditing which to the best of our knowledge and belief were standards generally accepted in India. Those standards necessary for the purposes of our audit; require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free b) In our opinion, proper books of account as required by of material misstatement. An audit includes examining, on a law have been kept by the Company so far as appears test basis, evidence supporting the amounts and disclosures from our examination of those books; in the financial statements. An audit also includes assessing c) The Balance Sheet, the Profit and Loss account and the accounting principles used and significant estimates the Cash Flow statement dealt with by this report are in made by management, as well as evaluating the overall agreement with the books of account; financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. d) In our opinion, the Balance Sheet, the Profit and Loss account and the Cash Flow statement dealt with by this 3. As required by the Companies (Auditors’ Report) Order, report comply with the accounting standards referred to 2003 (the ‘Order’) issued by the Central Government of in Section 211 (3C) of the Act; India in terms of Section 227(4A) of the Companies Act, 1956 (“the Act”), and on the basis of such checks as we e) On the basis of written representations received from considered appropriate and according to the information and the directors and taken on record by the Board, we explanations given to us, we annex hereto a statement on report that none of the Directors is disqualified as at the matters specified in paragraph 4 and 5 of the said order. March 31, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 4. Without qualifying our opinion attention is drawn to:- of the Act;

a) Note 3 (A) in Schedule 18 regarding demerger of f) In our opinion and to the best of our information and Regional General Entertainment Channels business according to the explanations given to us, the said undertaking of Zee News Limited to the Company accounts read together the significant accounting as per the Scheme of Arrangement u/s 391 to 394 policies and notes to accounts as per Schedule 18, give approved by the Honorable High Court at Mumbai the information required by the Act, in the manner so and in pursuance thereof assets and liabilities of the required and give a true and fair view in conformity with merged undertaking are accounted and surplus of Rs./ the accounting principles generally accepted in India: Thousand 1,197,357 is taken to Securities Premium. i) In the case of the Balance Sheet, of the state of b) Note 3 (B) in Schedule 18 regarding demerger of 9X affairs of the Company as at March 31, 2010; Channel business undertaking of 9X Media Private Limited to the Company as per the Scheme of ii) In the case of the Profit and Loss account, of the Arrangement approved by the Honorable High Court at Profit for the year ended on that date; and Mumbai and in pursuance thereof assets and liabilities iii) In the case of the Cash Flow statement, of the of the merged undertaking are accounted and deficit of cash flows for the year ended on that date Rs./Thousand 133,220 is adjusted in General Reserve. c) Note 3 (C) in Schedule 18 regarding Amalgamation For MGB & Co of its erstwhile subsidiary ETC Networks Limited with Chartered Accountants the Company w.e.f. March 31, 2010 and demerger of Registration No- 101169W Education business undertaking to Zee Learn Limited Mohan Bhandari as on April 1, 2010 as per the Composite Scheme of Partner Amalgamation and arrangement u/s 391 to 394 and Membership No. 12912 other applicable provisions, approved by the Honorable Mumbai, September 23, 2010 High Court at Mumbai and effect thereof is given in

104 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Annexure referred to in Paragraph (3) of Auditors’ 3. a) The Company has not granted any loan, secured or Report to the members of Zee Entertainment unsecured to companies, firms or other parties covered Enterprises Limited on the accounts for the year in the register maintained under Section 301 of the Act. ended March 31, 2010 b) The Company has not taken any loan, secured or 1. a) The Company has maintained proper records showing unsecured from companies, firms or other parties full particulars, including quantitative details and covered in the register maintained under Section 301 situation, of its fixed assets. of the Act.

b) The fixed assets are physically verified by the 4. In our opinion and according to the information and Management according to a phased program which, in explanations given to us, there is adequate internal control our opinion is reasonable having regard to the size of system commensurate with the size of the Company and the the Company and the nature of its assets. Pursuant nature of its business with regard to purchases of inventory, to the program, a portion of fixed assets has been fixed assets and sale of goods and services. We have not physically verified by the management during the year, observed any continuing failure to correct major weaknesses except assets lying with third parties and no material in internal controls. discrepancies were noticed on such verification. 5. According to the information and explanations given to c) During the year, there was no disposal of substantial us, there are no contracts or arrangements the particulars part of fixed assets. of which are required to be entered into the register in pursuance of Section 301 of the Act. 2. a) The inventory has been physically verified (copyrights of TV programs / movie rights verified with reference 6. According to the information and explanations given to us, to title documents/agreements) by the management at the Company has not accepted any deposits from the public reasonable intervals during the year. during the year. b) In our opinion, the procedures of physical verification of 7. In our opinion, the Company has an internal audit system inventory followed by the management are reasonable commensurate with the size and nature of its business. and adequate in relation to the size of the Company and the nature of its business. 8. We are informed that the Central Government has not c) In our opinion, the Company has maintained proper prescribed the maintenance of cost accounting records records of inventory and no discrepancies were under Section 209 (1) (d) of the Act in respect of the noticed on physical verification as compared to the Company’s activities. book records.

9. According to the records of the Company examined by us and information and explanations given to us:

a) The Company has been generally regular, in depositing its Statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax (except delay in few instances in depositing Income Tax deducted at source), VAT, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and others as applicable. There are no undisputed amounts payable in respect of the aforesaid dues which have remained outstanding as at March 31, 2010 for a period of more than six months from the date they became payable.

b) There are no disputed dues on account of Income Tax, VAT, Wealth Tax, Service Tax, Custom Duty, Excise Duty and Cess, which have not been deposited except in respect of:

Name of the Statute Nature of the Dues Amount Period to which the Forum where dispute is (Rs./Thousand) amount relate pending The Central Excise Act, 1944 Service Tax 1,066 F.Y. 2004-2005 Commissioner of Service and Service Tax Tax 312,239 F.Y. 2006-2007 148,240 F.Y. 2007-2008 21 F.Y. 2006-2007 Asst Commissioner of 11 F.Y. 2007-2008 Service Tax 12 F.Y. 2008-2009 Wealth Tax Act Wealth tax 13 F.Y. 1996-1997 Income Tax Appellate Tribunal Maharashtra Value Added Sales Tax 12,858 F.Y. 2005-2006 Asst Commissioner of Tax Act 2002 Sales Tax Taking Entertainment Places Operational Review Governance & Financials 105

Standalone Financials Consolidated Financials

10. The Company does not have accumulated losses at the end 16. The Company has not raised any term loan during the year. of the financial year and has not incurred cash losses during the current financial year or in the immediately preceding 17. On the basis of review of utilization of funds which is based financial year. on an overall examination of the Balance Sheet of the Company and related information as made available to us, 11. The Company has not defaulted in repayment of dues to we report that no short term funds have been used for long banks and financial institutions. The delayed payments by term investments. merged Company are not reported as it is merged w.e.f. March 31, 2010 and dues are paid before the effective date. 18. The Company has not made preferential allotment of shares to parties and companies covered in the register maintained 12. The Company has not granted any loans or advances on the under Section 301 of the Act during the year. basis of security by way of pledge of shares, debentures and other securities. 19. The Company has not issued any secured debentures during the year. However pursuant to the Composite 13. The Company is not chit fund or a nidhi / mutual benefit Scheme of Arrangement, the Company has been vested fund / society. liability of secured debentures issued by erstwhile ETC Networks Limited which is subsequently demerged to Zee 14. The Company is not dealing in or trading in shares, securities, Learn limited. debentures and other investments. 20. The Company has not raised any money by public issue 15. In our opinion, the terms and conditions of guarantees during the year. given by the Company for loans taken by subsidiaries and others are prima-facie not prejudicial to the interests of 21. On the basis of our examination and according to the the Company. information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year. For MGB & Co Chartered Accountants Registration No- 101169W Mohan Bhandari Partner Membership No. 12912 Mumbai, September 23, 2010 106 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Balance Sheet as at March 31, (Rs. in ‘000)

Schedules 2010 2009 SOURCES OF FUNDS Shareholders' Funds Share Capital 1 489,038 434,007 Reserves and Surplus 2 27,764,251 22,996,025 28,253,289 23,430,032 Loan Funds Secured Loans 3 585,038 1,213,964 Unsecured Loans 4 603,992 495,450 1,189,030 1,709,414

Total 29,442,319 25,139,446

APPLICATION OF FUNDS Fixed Assets 5 Gross Block 2,166,651 1,898,167 Less : Depreciation / Amortisation 582,909 498,900 Net Block 1,583,742 1,399,267 Capital Work-in-progress 1,110,966 183,250 2,694,708 1,582,517

Investments 6 15,319,290 13,496,163

Deferred Tax Assets (Net) [Refer Note 10] 49,354 39,986 Current Assets, Loans and Advances 7 Interest Accrued on Investments 1,973 - Inventories 4,531,303 3,194,763 Sundry Debtors 4,633,845 3,516,805 Cash and Bank Balances 3,002,910 1,104,344 Loans and Advances 5,422,413 6,448,945 17,592,444 14,264,857 Less : Current Liabilities and Provisions Current Liabilities 8 3,833,845 2,841,967 Provisions 9 2,379,634 1,402,161 6,213,479 4,244,128 Net Current Assets 11,378,965 10,020,729 Miscellaneous Expenditure (to the extent not written off or adjusted) 10 2 51

Total 29,442,319 25,139,446 Significant Accounting Policies and Notes to Accounts 18

As per our attached report of even date For and on behalf of the Board

For MGB & Co. Punit Goenka Managing Director Chartered Accountants Nemi Chand Jain Director Mohan Bhandari Partner Hitesh Vakil President & Chief Financial Officer

Place : Mumbai M Lakshminarayanan Company Secretary Dated : September 23, 2010 Taking Entertainment Places Operational Review Governance & Financials 107

Standalone Financials Consolidated Financials

Profit and Loss Account for the year ended March 31, (Rs. in ‘000)

Schedules 2010 2009 Income Sales and Services 11 12,787,436 12,102,425 Other Income 12 1,061,815 1,050,920 Total 13,849,251 13,153,345

Expenditure Operational Cost 13 4,256,652 5,030,689 Personnel Cost 14 814,558 924,181 Administrative and Other Expenses 15 771,601 595,827 Selling and Distribution Expenses 16 1,633,490 1,942,767 Total 7,476,301 8,493,464

Operating Profit 6,372,950 4,659,881 Financial Expenses 17 175,254 778,737 Depreciation/Amortization 114,272 119,240 Profit Before Tax and Exceptional Item 6,083,424 3,761,904 Add: Exceptional Item Provision for Dimunition in Value of Investment - 25,806 Profit before Tax 6,083,424 3,787,710 Less - Provision for Taxation - Current Tax 1,030,560 1,277,143 - Deferred Tax 65,885 25,619 - Fringe Benefit Tax - 21,618 Add Excess Provision Written back 313,000 634,116 Add - MAT Credit Entitlement 288,424 - Net Profit after Tax 5,588,403 3,097,446 Add - Balance brought forward 8,893,473 7,209,482 Amount Available For Appropriation 14,481,876 10,306,928

Appropriations Interim dividends on equity shares 968,967 - Proposed Final Dividend on equity share 977,795 868,014 Tax on Dividend 323,332 145,441 General Reserve 1,100,000 400,000 Balance carried to Balance Sheet 11,111,782 8,893,473 Total 14,481,876 10,306,928

Earnings Per Share: (Rs.) Basic before Exceptional Item 12.51 7.08 Basic after Exceptional Item 12.51 7.14 Diluted before Exceptional Item 12.51 7.07 Diluted after Exceptional Item 12.51 7.13 (On distributable profits on shares outstanding)(Face Value Re.1) Significant Accounting Policies and Notes to Accounts 18

As per our attached report of even date For and on behalf of the Board

For MGB & Co. Punit Goenka Managing Director Chartered Accountants Nemi Chand Jain Director Mohan Bhandari Partner Hitesh Vakil President & Chief Financial Officer

Place : Mumbai M Lakshminarayanan Company Secretary Dated : September 23, 2010 108 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedules to the Balance Sheet as at March 31, (Rs. in ‘000)

2010 2009 SCHEDULE - 1 Share Capital [Refer Note 3 ] Authorised 1,399,200,000(500,000,000) Equity Shares of Re.1/- each 1,399,200 500,000

Nil (2,500,000) Cumulative Redeemable Preference Shares of Rs.100/- each - 250,000

Total 1,399,200 750,000

Issued, Subscribed and Paid up [ Refer Note 3 ] 434,007,111 Equity Shares of Re.1/- each fully paid up 434,007 434,007 (Out of the above 210,316,212 Equity Shares of Re.1/-each fully paid up were allotted for consideration other than cash against acquisition of investments)

Share Capital Suspense Account [Refer Note 3] 55,031 -

Total 489,038 434,007

SCHEDULE - 2 Reserves and Surplus Capital Redemption Reserve As per last Balance Sheet 70,000 70,000

Securities Premium As per last Balance Sheet 10,351,709 10,288,554 Add: Received during the year - 67,136 Add: Adjusted pursuant to the Scheme of Arrangement [Refer Note 3] 1,197,357 - Less : Premium on redemption of FCCB [Refer Note 5] 3,706 3,981 11,545,360 10,351,709 General Reserve As per last Balance Sheet 3,680,843 3,280,843 Add: Adjusted pursuant to the Scheme of Arrangement [Refer Note 3] 256,266 - Add: Appropriated during the year 1,100,000 400,000 5,037,109 3,680,843

Profit and Loss Account 11,111,782 8,893,473

Total 27,764,251 22,996,025 Taking Entertainment Places Operational Review Governance & Financials 109

Standalone Financials Consolidated Financials

Schedules to the Balance Sheet as at March 31, (Rs. in ‘000)

2010 2009 SCHEDULE - 3 Secured Loans [ Refer Note 4]

Debentures 500,000 -

Term Loan From Banks 60,000 1,000,000

Working Capital Finance From Banks 12,135 200,000

Vehicle Loans 12,228 13,964 - Interest accrued and due 675 -

Total 585,038 1,213,964

SCHEDULE - 4 Unsecured Loans Term Loan from Banks 600,000 -

Foreign Currency Convertible Bonds [Refer Note 5] - 195,450

Short Term Loan From Bank - 300,000 Inter Corporate Deposits 3,515 -

Interest accrued and due 477

Total 603,992 495,450 110 Zee Entertainment Enterprises Limited | Annual Report 2009-10 - - - 8,752 14,308 60,641 54,350 48,589 384,791 121,258 706,578 183,250 183,250 31, 2009 1,399,267 As At March (Rs. in ‘000) 83 Net Block 2,082 11,959 60,412 61,947 47,842 20,787 2010 As At 328,154 782,812 376,603 167,242 834,785 1,399,267 March 31, 1,583,742 1,110,966

- - 5,862 69,888 38,780 28,430 75,595 14,808 31,621 2010 Up to 498,900 317,925 582,909 March 31, - - - 895 2,665 1,770 4,563 21,121 96,464 15,506 121,863 Deduction

- - 813 5,200 5,247 5,616 5,634 year 61,932 17,854 11,976 119,240 for the 114,272 ------Depreciation 192 5,652 3,312 1,366 192 63,517 17,561 91,600 5,652 3,312 1,366 TOTAL 63,517 17,561 91,600 (Rs. in ‘000) ------Scheme of of Scheme Arrangement Arrangement [Refer Note 3] Note [Refer Acquisition on on Acquisition 5,720 9X 45,527 - - 51,247 - 5,049 ------61,701 34,428 21,272 12,371 55,686 19,453 2009 400,781 Up to 288,940 498,900 March 31, ETC

83 - Accumulated depreciation - - - 2,082 81,847 66,274 90,377 62,650 52,408 2010 415,383 242,837 As At 192 1,898,167 1,152,710 2,166,651 5,652 3,312 1,366 March 31, 17,990 11,841 40,353 RGEC - - - 8,361 3,836 2,888 27,666 13,870 28,960 83 151,266 209,181 584 Deduction 2,082 8,697 12,261 14,199 84,756 16,702 782,812 - 274,682 414,046 TOTAL - 83 584 ------2,082 8,697 14,199 16,702 84,756 12,261 274,682 414,046 9X 12,415 109,054 Gross Block Acquisition 121,469 Arrangement on Scheme of [Refer Note 3]

- - - - - 83 584 941 Gross block 6,359 6,258 3,019 2,082 43,590 11,871 6,863 779,617 ETC 117,676 33,776 10,097 63,619 11,942 303,798 191,522 Addition - - - - -

390 3,195 7,840 5,678 76,009 75,622 60,960 65,690 28,205 47,952 28,751 10,444 2009

As At 995,518 419,219 176,944 April 1, RGEC 1,622,035 101,055 1,898,167 Leasehold Improvements Plant & Machinery Buildings Furniture and Fixtures Vehicles Equipments Freehold Land Leasehold Land Knowledge based conent Software Trademark Leasehold Improvents Trade Mark Knowledge based content Plant and Machinery Equipments Furniture and Fixtures Vehicle Software Leasehold Land TOTAL Previous Y ear b) Tangibles a) Intangibles Capital Work In Progress * Add: Acquired under Scheme of Arrangement [Refer Note 3] TOTAL Schedules to the Balance Sheet as at March 31, SC H ED U LE - 5 Fixed Assets (At cost) Description Note :- b) Building includes Rs./Thousand 114 the value of shares in a Co-operative Society. 2 ) Part of Building has been given on Operating Lease 3 ) Assets vested on Amalgamation,demerger as follows : Description a) Intangibles b) Tangibles TOTAL Capital Work In Progress Taking Entertainment Places Operational Review Governance & Financials 111

Standalone Financials Consolidated Financials

Schedules to the Balance Sheet as at March 31, (Rs. in ‘000)

2010 2009 SCHEDULE - 6 Investments Long Term - at cost In Subsidiaries - Wholly owned - Unquoted 34(34) Ordinary Shares of USD 1/- each of Zee Multimedia Worldwide Limited ZMWL,BVI , (ZMWL) 10,840,000 10,840,000 501 (501) Ordinary Shares of USD 1/- each of Asia Today Limited (Other 50% held through wholly owned subsidiary ZMWL) 1,480,000 1,480,000 25,000(25,000) Ordinary Shares of USD 1/- each of ZES Holdings Limited 1,150 1,150 50,000(50,000) Equity Shares of of Rs. 10/- each of Zee Sports Limited 500 500

In Subsidiaries - Others Unquoted 74,000 (74,000) Equity Shares of Rs. 10/- each of Zee Turner Limited 740 740 (Extent of Holding 74 %) 5,000 (5,000) Equity Shares of Rs. 10/- each of Taj Television India Private Limited 20,558 20,558 (Extent of Holding 50%)

In Subsidiaries - Others Quoted Nil (4,889,584) Equity Shares of Rs. 10/- each of ETC Networks Limited - 271,975 (Extent of Holding 50.18%) [ Refer Note 3 (C) (ii)]

In Associate - Quoted 1,321,200 (1,321,200) Equity Shares of Rs. 10/- each of Aplab Limited 46,599 46,599

Quoted - Non-Trade 1,800,000 (1,800,000)Equity Shares of Rs. 2/- each of Essel Propack Limited 1,500 1,500

Unquoted -Trade 778,471(778,471) Equity Shares of Rs. 10/- each of Asianet Communication Limited 119,297 119,297 67,693 (67,693) Equity Shares of Rs. 10/- each of Asianet Infrasturcture Limited 10,374 10,374 423,082 (423,082) Equity Shares of Rs. 10/- each of Asianet Radio Private Limited 64,836 64,836 423,082 (423,082) Equity Shares of Rs. 10/- each of Asianet News Private Limited 64,836 64,836 23,436 (23,436) , 7.25% Redeemable Non-cumulative Preference Shares of Rs. 1/- each 23 23 of Wire & Wireless (India) Limited

Others 50 (Nil)Equity shares of Rs. 10/- each of North Karnataka GSB Bank Limited 1 - 2,500 (Nil) Equity shares of Rs.10/- each of Samata Sahakari Bank Limited 63 - 1000 (1,000) Equity share of Rs. 10/- each of Ecool Gaming Solutions Private Limited 5 5 1,000 (1,000) Equity Shares of Rs. 10/- each of Pan India Network Private Limited 5 5 3,000(3,000) Equity Shares of Rs. 10/- each of Last Minute Media Private Limited 300 300 8% Certificate of Deposit (Non - Transferrable) with SICOM Limited 1,000,000 -

National Savings Certificates 15 10 (Pledged with VAT Department]

Current Investment 10 (Nil) NSE MIBOR (Non- Transferrable) Unsecured Redeemable Non Convertible 1,000,000 - Debentures of Rs. 10,00,00,000/- each of Edelweiss Finance & Investments Limited 9,000,000(Nil) units of Rs. 10/- each of LIC MF Income Plus - Daily Dividend Plan 90,000 - 499,200 (Nil) units of Rs. 10/- each of Kotak Floater - Long Term - Daily Dividend 5,032 - 112 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedules to the Balance Sheet as at March 31, (Rs. in ‘000)

2010 2009 Immoveable Properties Freehold Land 573,456 573,456

All the above securities are fully paid up

Total 15,319,290 13,496,162

Aggregate Book Value of all Quoted Investments 48,099 320,074 Market Value of all Quoted Investments 128,326 350,008 Net Asset Value of Units of Mututal Fund 95,032 - Aggregate Book Value of all Unquoted Investments 15,271,191 13,176,088

SCHEDULE - 7 Current Assets, Loans and Advances [Refer Note 3 ] A. Current Assets Interest Accrued on Investments 1,973 -

Inventories TV Programs and Movies - Unamortized cost 4,450,768 2,813,774 - Under Production 38,520 363,730 Raw Stock - Tapes 12,927 17,259 Educational Materials and Equipments 29,088 - 4,531,303 3,194,763

Sundry Debtors (Unsecured and considered good , unless otherwise stated) More than six months [includes doubtful Rs./Thousand 506,551 (466,512)] 942,567 895,634 Others 4,197,829 3,087,683 5,140,396 3,983,317 Less: Provision for doubtful debts 506,551 466,512 [includes Rs./Thousand 667,415 (412,849) due from Subsidiaries] 4,633,845 3,516,805

Cash and Bank Balances Cash in hand 3,146 1,764 Balances with Scheduled Banks in Current Accounts 219,055 1,102,160 Balances with Scheduled Banks in Deposit Accounts 2,625,896 68 Balances with Non Scheduled Bank in Current Account [Refer Note 6 (d)] - 352 Cheques in hand / transit 154,813 - 3,002,910 1,104,344 Taking Entertainment Places Operational Review Governance & Financials 113

Standalone Financials Consolidated Financials

Schedules to the Balance Sheet as at March 31, (Rs. in ‘000)

2010 2009 B. Loans and Advances (Unsecured and considered good unless otherwise stated)

Loans 1,291,806 5,930,817

Advances (recoverable in cash or in kind or for value to be received) 3,387,851 481,800 Less: Provision for doubtful advances 137,552 81,514 [includes Rs./Thousand 1,816,476 (29,249) due from Subsidiaries] 3,250,299 400,286

Advance Direct Taxes(Net of Provisions) 381,379 - Advance Indirect Taxes 349,137 -

Deposits 149,792 117,842 5,422,413 6,448,945

TOTAL 17,592,444 14,264,857

SCHEDULE - 8 Current Liabilities* Sundry Creditors: For Goods 990,044 1,054,223 For Expenses and other Liabilities [Refer note 6(m)] 1,962,547 887,788 Trade Advances / Deposits received 114,660 21,736 Due to Principals (pending remmittance) 759,327 871,073 Interest accrued but not due 24 50 Unclaimed dividend** 7,243 7,097 [*include Rs./Thousand 779,585(924,607)due to subsidiaries] [**There are no amounts due and outstanding to be credited to Investor Education and Protection Fund as at March 31, 2010].

TOTAL 3,833,845 2,841,967

SCHEDULE - 9 Provisions Provision : For Taxation (Net of advances) - 303,939 For Retirement Benefits 109,540 84,767 Proposed Dividend (including tax) 2,270,094 1,013,455

TOTAL 2,379,634 1,402,161

SCHEDULE - 10 Miscellaneous Expenditure (to the extent not written off or adjusted) Share Issue Expenses 2 51

TOTAL 2 51 114 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedules to the Profit and Loss Account for the year ended March 31, (Rs. in ‘000)

2010 2009 SCHEDULE - 11 Sales and Services Broadcasting Revenue 11,513,792 10,098,103 Sales 1,027,971 1,670,595 Services 245,673 333,727

TOTAL 12,787,436 12,102,425

SCHEDULE - 12 Other Income Dividend - From Subsidiaries 12,224 12,224 - From Others 7,152 5,489 Interest (Gross) [T.D.S. Rs./Thousand 93,151 (204,952) ] 891,886 883,061 Rent Income[T.D.S. Rs./Thousand 11,581 (7,067) ] 68,768 64,119 Miscellaneous Income (Includes Balance written back Rs./Thousand 72,220 (80,057) 81,785 86,027

TOTAL 1,061,815 1,050,920

SCHEDULE - 13 Operational Cost Opening Stock TV Programs and Movies - Unamortized cost 2,813,774 2,353,280 Under Production 363,730 4,604

Add : Acquired on Scheme of Arrangement [ Refer Note 3] 1,679,199 - Add : Acquisition of TV Programs and Movies 2,748,863 4,134,122 Production Cost 986,150 1,599,792

Less : Closing Stock TV Programs and Movies - Unamortized cost 4,445,704 2,813,774 Under Production 38,520 363,730 4,107,492 4,914,294

Telecast cost 149,160 116,395

TOTAL 4,256,652 5,030,689

SCHEDULE - 14 Personnel Cost Salaries, Allowances and Bonus 754,271 842,874 Contribution to Provident and other funds 37,562 40,741 Staff Welfare Expenses 22,725 40,566

TOTAL 814,558 924,181 Taking Entertainment Places Operational Review Governance & Financials 115

Standalone Financials Consolidated Financials

Schedules to the Profit and Loss Account for the year ended March 31, (Rs. in ‘000)

2010 2009 SCHEDULE - 15 Administrative and Other Expenses Rent 91,271 67,607 Rates and Taxes 97,712 8,446 Repairs and Maintenance - Building 1,273 6,831 - Plant and Machinery 13,483 17,401 - Others 12,932 9,361 Insurance 2,141 4,136 Electricity and Water charges 23,772 35,986 Communication expenses 27,845 42,681 Printing and Stationary 8,342 11,630 Miscellaneous expenses 27,443 20,796 Service Charges/expenses 61,177 89,990 Travelling ,Conveyance and vehicle expenses 70,069 88,501 Legal and Professional charges 63,453 52,920 Bad debts and advances written off 334,157 - 72,467 Less: Adjusted against provision (302,451) 31,706 - Provision for doubtful debts and Advances 161,537 63,249 Loss on sale/discard of fixed assets (net) 77,396 3,776 Share Issue Expenses written off 49 49

Total 771,601 595,827

SCHEDULE - 16 Selling and Distribution Expenses Freight and Forwarding 775 3,416 Advertisement and Publicity Expenses 556,887 584,699 Commission on sales and services 225,318 251,001 Business Promotion Expenses 850,510 1,103,651

Total 1,633,490 1,942,767

SCHEDULE - 17 Financial Expenses Interest on - Fixed Loan 64,547 148,848 - Bonds 1,256 1,075 - Others 61,126 122,505 Discounting and Financing Expenses 518 2,625 Loss on Foreign Exchange derivative contracts and exchange difference 47,807 503,684

Total 175,254 778,737 116 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule -18 Significant Accounting Policies and Notes to Accounts Background Zee Entertainment Enterprises Limited (“ZEEL” or “the Company”) is incorporated in the State of Maharashtra, India. The Company has been mainly in the following businesses during the year:

a) Broadcasting of Satellite Television Channels uplinked from India;

b) Advertisement canvassing agent for other television channels;

c) Sale of programs including movies and program feeds mainly to its subsidiaries for broadcasting on satellite television channels all over the world;

d) Production and Distribution of Movies.

Significant Accounting Policies 1. Basis of Accounting The Financial Statements have been prepared under the Historical Cost Convention and on accrual basis in accordance with the accounting standards referred to in Section 211 (3C) of the Companies Act, 1956.

2. Use of Estimates The preparation of financial statements requires the management to make estimates and assumptions that affectthe reported amounts of assets and liabilities, as of the date of the financial statements and the reported amount of revenue and expenses of the year. Actual results could differ from these estimates. Any revision to estimates is recognized prospectively in current and future periods.

3. Fixed Assets a) Fixed assets are stated at original cost of acquisition/ installation net of accumulated depreciation, amortization and impairment losses. The cost of fixed assets includes taxes, duties, freight and other incidental expenses related to the acquisition and installation of the respective assets.

b) Capital Work in progress is stated at the amount expended upto the date of Balance sheet including advances for capital expenditure.

c) Computer software including implementation expenses (intangible asset) is capitalized as an intangible asset in the year in which related software is implemented.

4. Borrowing Costs Borrowing Costs attributable to the acquisition or construction of qualifying assets are capitalized as a part of the cost of such assets. All other borrowing costs are charged to revenue.

5. Impairment of Assets At each Balance Sheet date, the Company reviews the carrying amount of fixed assets to determine whether there is an indication that those assets have suffered impairment loss. If any such indication exists, the recoverable amount of assets is estimated in order to determine the extent of impairment loss. The recoverable amount is higher of the net selling price and value in use, determined by discounting the estimated future cash flows expected from the continuing use of the asset to their present value.

6. Depreciation/Amortization a) Depreciation on fixed assets is provided on Straight Line Method at the rate specified in Schedule XIVtothe Companies Act, 1956.

b) Premium on Leasehold Land and Leasehold Improvements are amortized over the period of Lease.

c) Computer Software (intangible assets) is amortized on straight line basis over a period of 36 months from the date of its implementation based on the management estimate of useful life.

7. Investments a) Long Term Investments are carried at cost. Provision for diminution in value of these investments other than temporary is made , wherever required.

b) Current Investments are carried at cost or fair value whichever is lower. Taking Entertainment Places Operational Review Governance & Financials 117

Standalone Financials Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts 8. Transaction in Foreign Currencies a) Foreign currency transactions are accounted at the exchange rates prevailing on the date of such transactions.

b) Foreign currency monetary assets and liabilities at the Balance Sheet date are translated at the closing rate. Gain and losses resulting on settlement/translation of monetary assets and liabilities are recognized in the Profit and Loss Account.

c) Non-monetary items denominated in foreign currency are carried at cost.

d) In respect of forward exchange contracts assigned to the foreign currency assets/ liabilities, the difference due to change in exchange rate between the inception of forward contract and date of the Balance Sheet is recognized in the Profit and Loss Account. Any profit or loss resulting on settlement/ cancellation of forward contract is recognized as income or as expense in the year it arises.

9. Revenue Recognition a) Broadcasting revenue - Advertisement revenue (net of agency commission) is recognized when the related advertisement or commercial appears before the public i.e. on telecast. Subscription revenue is recognized on completion of service.

b) Sales (includes licensing of TV Programs and movies ) are recognized when the delivery is completed.

c) Services

i. Commission-Space selling is recognized when the related advertisement or commercial appears before the public i.e. on telecast.

ii. Theatrical revenue from movies is recognized on receipt of reports

d) Dividend is recognized when the right to receive the dividend is unconditional.

10. Inventories a) TV Programs and Movie rights (Produced and acquired): TV Programs and movie rights are carried at lower of unamortized cost or realizable value. Where the realizable value on the basis of its useful economic life is less than its carrying amount, the difference is expensed as impairment.

i. Cost of reality shows / chat shows / events/ game shows etc. are fully expensed on telecast.

ii. TV Programs (other than (i) above) are amortized over three financial years from the year of telecast as per management estimates of future revenue potential.

iii. Movie rights are amortized on a straight-line basis over the license period or 60 months from the date of purchase whichever is shorter.

b) Movie produced and acquired for distribution: The amortization pertaining to domestic theatrical, International theatrical rights, television rights, music rights, video rights and others are made, based on management estimates of revenues from each of these rights

i. Theatrical rights: - 70% cost is amortized over three months of theatrical release of movie and balance 30% in subsequent three quarters.

ii. Satellite rights, Music rights, Home Video rights etc are expensed on sale.

iii. In case of Negative rights of movies 90% of cost is amortized as per b(i) above and 10% allocated to IPR is amortized over subsequent nine years.

c) TV programs and movies under production are stated at cost. Cost comprises of material cost, cost of services and other expenses incurred upto the date of balance sheet.

d) Raw Stock - Tapes are valued at lower of cost or estimated net realizable value. Cost is taken on First in First out (FIFO) basis.

e) Educational Materials/ Equipments are valued at lower of cost or estimated net realizable value. Cost means average cost. 118 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts 11. Retirement Benefits a) Short-term employee benefits are expensed at the undiscounted amount in the profit and loss account in the year employee renders the service.

b) Post employment and other long term employee benefits are expensed in the profit and loss account in the year the employee render the service. The expense is recognized at the present value of the amount payable determined using actuarial valuation techniques. Actuarial gains and losses in respect of post employment and other long term benefits are charged to the profit and loss account.

12. Accounting for Taxes on Income a) Current Tax is determined as the amount of tax payable in respect of taxable income for the year as per the provisions of the Income Tax Act, 1961.

b) Deferred tax is recognized, subject to consideration of prudence in respect of deferred tax asset, on timing difference, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods and measured using tax rates and laws enacted.

13. Leases a) Finance Lease Assets acquired under Finance Lease are capitalized and the corresponding lease liability is recorded at an amount equal to the fair value of the leased asset at the inception of the lease. Initial costs directly attributable to lease are recognized with asset under lease.

b) Operating Lease Lease of assets under which all the risk and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments/revenue under operating leases are recognized as expense/income on accrual basis in accordance with the respective lease agreements.

14. Miscellaneous Expenditure Share Issue and Preliminary expenses are amortized over a period of ten years.

15. Earnings Per Share Basic earnings per share is computed and disclosed using the weighted average number of common shares outstanding during the year. Dilutive earnings per share is computed and disclosed using the weighted average number of common and dilutive common equivalent shares outstanding during the year, except when the results would be anti-dilutive.

16. Provisions, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognized when there is present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognized but are disclosed in the notes to accounts. Contingent Assets are neither recognized nor disclosed in the financial statements.

B. Notes to Accounts

1. Prior Year Comparatives Previous year’s figures are regrouped, rearranged, or recast wherever necessary to confirm to thisyear’s classification. Current year’s figures are not comparable due to the restructuring [Refer Note 3].Figures in brackets pertain to previous year.

2. a) TV Program and movie rights are intangible assets as defined in AS - 26 but these are used for broadcasting business hence considered and included in Inventories.

b) In Schedule 13, Operational Cost includes Production and Acquisition Cost of TV Program and movie rights and movies amortized / impaired, sold etc. The Company has impaired TV program and movie rights of Rs./Thousand 69,881 (Nil) during the year. Taking Entertainment Places Operational Review Governance & Financials 119

Standalone Financials Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts 3. Restructuring A) Acquisition of Regional General Entertainment Channel Business Undertaking of Zee News Limited: a) The Scheme of Arrangement under Section 391 to 394 and other applicable provisions of the Companies Act, 1956 between Zee News Limited (ZNL) and the Company their respective shareholders and creditors was sanctioned by the Hon’ble Bombay High Court at Mumbai on March 19, 2010 and the said order filed with the Registrar of Companies on March 29, 2010. Pursuant to the Scheme, the Regional General Entertainment Channel (RGEC) Business Undertaking of ZNL comprising of six television channels namely Zee Marathi, Zee Talkies, Zee Bangla, Zee Telugu , Zee Kannada, and Zee Cinemalu (broadcasting yet to be commenced), assets of Zee Gujrathi (a discontinued television channel) was demerged from ZNL,transferred and vested with the Company with effect from January 1, 2010.

b) The said Scheme has been given effect in these financial statements and in pursuance of the Scheme:

i. The assets and liabilities of RGEC Business Undertakings are transferred to and recorded in the books of accounts of Company at their respective book values and the difference (surplus) is credited to Securities Premium account as under:-

Particulars (Rs./Thousand) Fixed Assets 63,897 Deferred Tax Assets 25,952 Current Assets , Loans and advances: Inventories 1,681,356 Sundry Debtors 1,251,107 Cash and Bank Balances 86,664 Loans and Advances 546,324 3,565,451

Total Assets 3,655,300

Secured and Unsecured Loans 1,144,371 Current Liabilities and Provisions 1,263,095 2,407,466

Total Liabilities 2,407,466

Net Assets 1,247,834

Less: Shares to be issued and alloted 50,477

Surplus taken to Securities Premium account 1,197,357

ii. 50,476,622 equity shares of Re.1/- each at par to be allotted to the equity share holders of Zee News Limited (ZNL)in the ratio of Four equity shares of the Company for every Nineteen equity shares of ZNL. Pending issue and allotment of shares as at the balance sheet date Rs./Thousand 50,477 has been credited to Share Suspense Account.

iii. The value of inventories of RGEC are written down by Rs./Thousand 115,029 on account of difference in the relevant accounting policy of ZEEL and ZNL, and debited to General Reserve.

B) Acquisition of the 9X Channel Business Undertaking of 9X Media Private Limited: i. The Scheme of Arrangement (‘the scheme’) under Section 391 to 394, read with sections 78, 100 to 104 of the Companies Act 1956 between 9X Media Private Limited (“Transferor Company”) and the Company and their respective shareholders and creditors was sanctioned by the Hon’ble High Court at Mumbai on September 9, 2010, and the said order filed with Registrar of Companies on September 22, 2010. Pursuant to the Scheme, the 9X Channel Business Undertaking (9X) of 9X Media Private Limited is demerged and vested with the Company on appointed date i.e. March 31, 2010 on a going concern basis at book values complying with the conditions and provisions of Section 2(19AA) of the Income Tax Act, 1961. 120 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts ii. The Scheme has been given effect in these financial statements and in pursuant to the Scheme the assets and liabilities of 9X Business undertaking are transferred to and recorded in the books of the Company at their respective book values and difference (deficit) is adjusted to General Reserve as under :-

Particulars Rs./Thousand Fixed Assets 70,222 Current Assets , Loans and advances: Sundry Debtors 34,487 Loans and Advances 404,619 439,106

Total Assets 509,328

Secured and Unsecured Loans 600,477 Current Liabilities and Provisions 41,930 642,406

Total Liabilities 642,406

Net Assets (133,079) Less: Shares to be issued and alloted 141

Surplus taken to General Reserve Account (133,220)

140,845 Equity Shares of Re. 1 (Rupee one) each are to be issued and allotted to the shareholders of 9X Media Private Limited as on June 30, 2010 in the ratio of One equity share of the Company for every Seventy One Equity Shares of Rs.10/- each held in 9X. Pending issue and allotment of shares, Rs. 140,845 has been credited to Share Suspense Account

C) Amalgamation of ETC Networks Limited with the Company and Demerger of Education Business Undertaking from the Company: i. The Composite Scheme of Amalgamation and Arrangement (“the composite scheme”) between erstwhile ETC Networks Limited (“ETC”) the Company Zee Learn Limited (“ZLL”) and the Company and their respective shareholders and creditors was approved by the Hon’ble High Court of Mumbai on July 16, 2010 and the said order filed with the Registrar of Companies on August 30, 2010. Pursuant tothe Scheme the erstwhile ETC has merged and vested in the Company at fair values on the Appointed date i.e. March 31, 2010. And upon such merger, the Education Business Undertaking from the Company was demerged and vested with Zee Learn Limited on the Appointed Date April 1, 2010. Taking Entertainment Places Operational Review Governance & Financials 121

Standalone Financials Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts ii. The Scheme has been given effect in these financial statements and in pursuant to the Scheme

a) The assets and liabilities of ETC are transferred to/and are accounted in the books of accounts of the Company at fair values on March 31, 2010 and the difference (surplus) is credited to General Reserve as under:

Particulars Rs./Thousand

Fixed Assets 971,139 Deferred Tax Assets 49,301 Investments 95,100 Current Assets , Loans and advances: Inventories 34,695 Sundry Debtors 214,175 Cash and Bank Balances 317,542 Loans and Advances 466,677 1,033,089

Total Assets 2,148,629

Secured and Unsecured Loans 935,119 Current Liabilities and Provisions 432,607 1,367,726

Total Liabilities 1,367,726

Net Assets 780,903 Less: Cancellation of Investments 4,889,584 Equity 271,975 shares of Rs.10 each held in ETC Networks Limited Less: Shares to be issued and alloted 4,413

Surplus taken to General Reserve 504,515

Had the Scheme not prescribed this treatment, Rs./Thousand 504,515 would have been credited to Capital Reserve as required by the Purchase Method prescribed by Accounting Standard (AS) 14 on “Accounting for Amalgamations”.

b) 4,413,488 Equity shares of Re. 1 each to be issued to the shareholders of ETC, as on the record date, in the ratio of ten equity shares of Re. 1 each of the Company for every eleven equity shares Rs. 10 each of ETC. Pending issue and allotment of shares, Rs./Thousand 4,413 has been credited to Share Suspense Account.

c) The authorized share capital of the Company stand increased by the amount of authorized share capital of the ETC of Rs. 649,200,000.

iii. Demerger of the Education Business Undertaking of the Company vested in to Zee Learn Limited as on April 1, 2010 pursuant to the Scheme: a) The whole of the undertaking, assets, properties and liabilities of the Education Business undertaking demerged and vested in at book values with effect from appointed date i.e. April 1, 2010. Accordingly, this scheme has not been given effect to, in these financial statements. 122 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts b) Upon the Scheme becoming effective, the Company shall transfer the whole of the undertaking with assets and liabilities of the Education Business undertaking on April 1, 2010 to the resulting Company ZLL. The difference between the book value of assets and the book value of liabilities transferred to the General Reserve of the Company as under :-

Particulars Rs./Thousand

Fixed Assets 800,655 Investments 5 Current Assets , Loans and advances: Inventories 29,088 Sundry Debtors 12,100 Cash and Bank Balances 207,010 Loans and Advances 236,637 484,835

Total Assets 1,285,495

Secured and Unsecured Loans 500,190 Current Liabilities and Provisions 154,012 654,202

Total Liabilities 654,202

Difference to be adjuted in General Reserve 631,293

c) In consideration of the transfer and vesting of the Education Business undertaking to ZLL, the members of the Company holding four fully paid up Equity shares of Re. 1/- each in the Company on the record date will be issued one fully paid up Equity shares of Rs. 1/- each of ZLL.

4. Secured Loans Debentures 500 Secured Redeemable Non-Convertible Debentures of Rs. 1,000,000 each fully paid up (issued by ETC Networks Limited merged with the Company on March 31, 2010) are redeemable at par in 4 equal installments with the earliest redemption being on January 6, 2012 and last being on January 6, 2015.

These Debentures are Secured by way of first charge on all fixed assets and current assets including certain fixed deposits, and first charge on escrow account for receivables of the erstwhile ETC. upon demeger of Education Division these debentures and related liabilities stand transferred to Zee Learn on and from April 1, 2010. The debentures are to be further secured by assignment of all the benefits under the agreement with a Charitable Trust for operations of school.

Term Loan from Bank Secured by way of first charge on all the fixed assets and current assets of erstwhile Digital Media Convergence Limited subsidiary of ETC Network Limited. The loan has since been repaid.

Working Capital Loan from Bank Secured by way of first charge on all the fixed assets and current assets of erstwhile Digital Media Convergence Limited. The loan has since been repaid.

Vehicle Loans Secured by hypothecation of vehicles Taking Entertainment Places Operational Review Governance & Financials 123

Standalone Financials Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts 5. Foreign Currency Convertible Bonds (FCCB) a) The Company had issued 10,000 0.5% Foreign Currency Convertible Bonds (FCCB) of US$10,000 each aggregating to US$100 million, redeemable on April 29, 2009 at 116.24% of their principal amount. The bond holders had an option to convert these bonds into equity shares from and including 8 June, 2004 to and including April 22, 2009 at an initial conversion price of Rs. 197.235 per share, with a fixed rate of exchange on conversion of Rs. 43.88 (US$1). Consequent to the restructuring, the conversion price was reset to Rs. 153.459 per share in terms of the Offering Circular, effective April 18, 2008.

b) During the year 379 bonds are redeemed on due date i.e. April 29, 2009 and Premium of Rs./Thousand 3,706 payable on redemption has been provided and adjusted against Securities Premium as per Section 78 of the Companies Act, 1956.

6. Disclosures: a) The Company has been deploying its surplus funds as short-term demand loans / inter corporate deposits, the borrowers are regular in repayment of principal and interest, hence are considered good.

b) Prior period expenses/ income included in respective heads in the Profit and Loss Account is as under: (Rs./Thousand)

Particulars 2010 2009 Program Cost 10,392 - Excess Interest on Tax Refund - 23,400 Business Promotion expenses - 7,605 Subscription Revenue - (1,562) Prior Period Expense (net) 10,392 29,443

c) Deposits includes Rs./Thousand 65,745 (65,745) due from Company in which director is interested.

d) Balances with Non Scheduled Bank (Rs./Thousand) Name of the Bank Balance as on March 31, Maximum Balance during the Year

2010 2009 2010 2009 Standard Chartered Bank Nil 352 352 1374 (Mauritius) Limited 124 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts e) Managerial Remuneration: i. The Computation of Net Profit in accordance with the provisions of Section 198/309/349 of the Companies Act, 1956 is as under: (Rs./Thousand)

Particulars 2010 2009 Net Profit before tax as per Profit and Loss Account 6,083,424 3,787,710 Add - Directors sitting fees 820 820 - Managerial remuneration 33,358 26,267 - Commission paid to Non-executive Directors 10,800 11,751 - Depreciation 114,272 119,240 - Loss on sale of fixed assets 77,396 3,352 - Provision for doubtful debts & Advances - 63,249 - Provision for diminution in the value of Investment - (25,806)

Less - Depreciation u/s 350 114,272 119,240 - Provision for doubtful debts & advances w/back (net) 140,914 -

Net Profit as per Section 198/349 of the Companies Act, 1956 6,064,884 3,867,343 Maximum permissible remuneration to Managing Director as per 303,244 193,367 Section 198/309 Remuneration is restricted to Managing Director as per service 33,358 26,267 agreement [Refer note (ii) below] Maximum permissible Commission to Non-Executive Independent 60,649 38,673 Directors under section 198/309

ii) Remuneration paid or provided in accordance with Section 198 of the Companies Act, 1956 to the Directors, included in personnel cost is as under.

(Rs./Thousand)

Particulars 2010 2009 Salary and Allowances 28,028 21,182 Provident fund contribution 1,856 1,908 Perquisites 3,474 3,177 Commission to Non Executive Independent Directors 10,800 11,751 Note: Salary and Allowances includes basic salary, house rent allowance, leave travel allowance and performance bonus but excluding leave encashment and gratuity provided on the basis of actuarial valuation.

iii. During the year, the Company has provided commission of Rs./Thousand 10,800 (11,751) to Non- Executive Independent Directors based on Profits for the year ended March 31, 2010.

iv. Remuneration (salaries and allowances) of Rs./Thousand 3,803 (3,708) has been paid to a non-executive director by a Foreign subsidiary Company. However, no remuneration is paid to him by the Company.

f) The erstwhile ETC (“the Transferor Company”) had taken over running business of Entertainment Television Network Private Limited during the year 1999-2000 along with the benefits of contracts, agreement and approvals for broadcasting of Television Channels. Some of the agreements and approvals are yet to be transferred / obtained in the name of erstwhile ETC. Taking Entertainment Places Operational Review Governance & Financials 125

Standalone Financials Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts g) Auditors Remuneration included in Miscellaneous Expenses is as under:

(Rs./Thousand)

Particulars 2010 2009 Audit fees 5,900 5,900 Tax Audit fees 500 500 Certifications and Tax Services 7,746 1,948

h) Foreign Exchange Difference i) The foreign exchange loss (net) including on forward contracts and cross currency swap of Rs./Thousand 29,548 (435,392) on settlement or realignment of foreign exchange has been adjusted in respective heads in the Profit and Loss account. ii) Foreign currency exposures that are not hedged by derivative instruments as at March 31, (Rs./Thousand)

Particulars 2010 2009 Foreign Currency Payables 78,952 241,903 Receivables 713,290 454,190

iii) Derivative contracts entered into by the Company and outstanding as at March 31, 2010 is Rs./Thousand Nil (4,125,600):

i) Employees Stock Option Scheme (ESOP 2009) The Company has instituted an Employees Stock Option Plan (ESOP 2009) as approved by the Board of Directors and Shareholders of the Company in 2009 for issuance of stock options in convertible into equity shares not exceeding in the aggregate 5% of the issued and paid-up capital of the Company as on March 31, 2009 i.e. up to 21,700,355 equity shares of Re. 1 each to the employees of the Company as well as that of its subsidiaries and also to non-executive directors including Independent Directors of the Company at the market price determined as per the SEBI (ESOS) Guidelines,1999. The said scheme is administered by the Remuneration Committee of the Board. During the year the Company has granted 4,340,000 stock options to eligible employees and directors at an exercise price of Rs. 239.80 per share. The options granted under the Scheme shall vest not less than one year and not more than five years from the date of grant of options. The options granted now would vest in the ratio of 50:35:15 at the expiry of one, two and three years from the date of grant and once vested, these would be exercisable at any time within a period of four years and the equity shares arising on exercise of options shall not be subject to any lock-in. The options were granted to the employees at an exercise price, being the latest market price as per SEBI (ESOS) Guidelines, 1999. In view of this, there being no intrinsic value on the date of grant (being the excess of market price of share under the Scheme over the exercise price of the option), the Company is not required to account the accounting value of options as per SEBI Guidelines

j) Micro, Small and Medium Enterprises: The Company has no dues to Micro, Small and Medium enterprises during the year ended March 31, 2010, on the basis of information provided by the parties and available on record.

k) Capital work in progress includes Capital Advances Rs./Thousand 1,086,506 (183,249). Enforceable agreements are yet to be executed for advances of Rs./Thousand 239,370 for purchase of properties.

l) Estimated amount of contracts remaining to be executed on capital account, not provided for (net of advances) is Rs./Thousand 247,489 (266,181).

m) Sundry Creditors for expenses and other liabilities under Current Liabilities include 1. Cheques overdrawn Rs./Thousand 128,038 (11,844) 2. Rs./Thousand 494,061 payable to Zee News Limited on demerger of RGEC channels for liabilities paid on our behalf. 126 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts n) Dividend Rs./Thousand 1,213 (1,315) unclaimed for the period more than seven years is transferred to Investor’s Education and Protection Fund during the year.

o) During the year the Company’s expenses of Rs./Thousand 166,797 (63,160) are shared by other related party, are netted off in relevant heads of expenses.

7. Employee Benefits A) Defined Benefit plans: (Rs./Thousand)

Particulars 2010 2009 Gratuity (Non Funded) I. Expenses recognized during the year 1. Current Service Cost 4,758 4,393 2. Interest Cost 2,371 2,056 3. Liabilities assumed on acquisiton 6,164 - 4. Actuarial Losses / (Gains) 1,717 3,374 Total Expenses 15,010 9,823

II. Net Asset/(Liability) recognized in the Balance Sheet as at March 31, 2010 1. Present value of defined benefit obligation (35,900) (25,885) Add: Pursuant to the Scheme (Refer Note 3) (7,519) - 2. Net Asset / (Liability) (43,419) (25,885)

III. Reconciliation of Net Asset/(Liability) recognized in the Balance Sheet as at March 31, 2010 1. Net Asset/(Liability) at the beginning of year (25,885) (19,680) 2. Expense as per I above (15,010) (9,823) 3. Employer contribution 4,995 3,618 4. Net Asset/(Liability) at the end of the year (35,900) (25,885) Add: Pursuant to the Scheme (Refer Note 3) (7,519) - Net Asset/(Liability) at the end of the year (43,419) (25,885)

IV. Actuarial Assumptions: 1. Discount rate 8.30% 7.95% 2. Expected rate of salary increase 7.50% 7.50% 3. Mortality LIC (1994 -96) LIC (1994-96)

Notes: a) Amounts recognized as an expense and included in the Schedule 14 “Personnel Cost” are gratuity Rs./Thousand 15,010 (9,823) and leave encashment Rs./Thousand 9,633 (22,137)

b) The estimates of future salary increases considered in the actuarial valuation taking into account the rate of inflation, seniority, promotion and other relevant factors, such as supply and demand inthe employment market. Taking Entertainment Places Operational Review Governance & Financials 127

Standalone Financials Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts B) Defined contribution plan: “Contribution to provident and other funds” is recognized as an expense in Schedule 14 of the Profit and Loss Account

8. Contingent Liabilities not provided for

(Rs./Thousand)

Particulars 2010 2009 a) Corporate Guarantees - For subsidiaries to the extent of loans availed/ outstanding Rs./Thousand 5,008,850 1,565,100 Nil (1,001,338) - For other related parties, loans outstanding Rs./Thousand 3,733,360 4,077,030 4,526,760 (3,949,415) b) Bank guarantees 75 1,810 c) Claims against the Company not acknowledged as debts 640,278 132,743 d) Disputed Direct Taxes 131,504 133,517 e) Disputed Indirect Tax 474,538 Nil f) Letters of credit (net of liability provided) 40,817 Nil g) Legal cases against the Company Unascertainable Unascertainable

9. ETC Networks Limited which got merged into the Company has entered into a tripartite agreement with a Charitable Trust / Society established under the Bombay Public Trust Act, 1950 and a Body Corporate to acquire exclusive rights for providing educational infrastructure, content, advisory and other related services to its school for a period of 30 years for Rs./Thousand 750,000 and sharing revenue. Rs./Thousand 750,000 paid for acquiring the rights and other preoperative cost of Rs./Thousand 24,600 is included in capital work in progress eventually to be capitalized with intangible asset on the date of commencement of operations by the school. This arrangement was meant for Education Business undertaking (EBU) and therefore , subsequent to the demerger of EBU , shall stand transferred to Zee Learn Limited.

10. Taxation a) Provision for current tax for the year has been made as per provisions of Section 115JB of the Income-Tax Act, 1961 i.e. Minimum Alternate Tax (MAT) due to claim of set-off of brought forward losses of undertaking taken over by the Company complying with Section 2 (19AA) of Income tax act 1961 and recognized the MAT credit entitlement as an asset under the head “Loans and advances”, in accordance with the Guidance Note on Accounting for Credit Available in respect of MAT issued by the ICAI.

b) The components of deferred tax balances as at March 31, 2010:

(Rs./Thousand)

Particulars 2010 2009 Deferred Tax Assets Provision for retirement benefits 32,639 28,813 Expenses allowable 24,473 - Provision for doubtful debts 116,627 158,567 Total 173,739 187,380 Deferred Tax Liabilities Depreciation 126,034 118,881 Others 47,652 28,513 Total 173,686 147,394 Deferred Tax Assets - Net 53 39,986 Add Pursuant to the Composite Scheme of Arrangement (Refer Note 3) 49,301 - Deferred Tax Assets - Net 49,354 39,986 128 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts 11. Leases a) The Company has taken office, residential facilities and plant and machinery (including equipments) etc. on lease under cancellable/non-cancellable agreements that are renewable on a periodic basis at the option of both the lessee and the lessor. The initial tenure of the lease generally is for 11 months to 60 months. (Rs./Thousand)

Particulars 2010 2009 Lease rental for the year 213,121 154,759 Future lease rental obligation payable (under non - cancelable lease) Not later than one year 135,311 140,683 Later than one year but not later than five years 83,906 187,153 Later than five years 4,711 -

b) In respect of assets given under operating lease. (i) The Company has given part of building under cancelable operating lease agreement. The initial term of the lease is for 36 months.

(ii) The lease rental revenue for the year is Rs. /Thousand 68,768 (64,119).

12. Related Party transactions (i) List of Parties where control exists Subsidiary Companies a) Wholly Owned Apac Media Ventures Limited; Asia Business Broadcasting Mauritius Limited; Asia Today Limited; Asia TV Limited; Expand Fast Holding (Singapore) Pte. Limited; Zee CIS Holding LLC ; Zee Multimedia (Maurice) Limited; Zee Multimedia Worldwide Limited, Mauritius; Zee Multimedia Worldwide Limited (BVI); Zee Sports Americas Limited; Zee Sports International Limited; Zee Sports Limited; Zee Technologies (Guangzhou) Limited; Zee Telefilms Middle East FZLLC; Zee TV South Africa (Proprietary) Limited; Zee TV USA Inc.; ZES Holding Limited; Zee Entertainment Studios BVI ; ZES Mauritius Limited; ZES International Limited; Zee Motion Pictures Private Limited. b) Others - Direct ETC Networks Limited (merged as on March 31, 2010)*; Taj Television India Private Limited; Zee Turner Limited. *Cornershop Entertainment Company Private Limited, Cornershop Animation Company Private Limited, Digital Media Convergence Limited and Remed Services Private Limited (merged with erstwhile ETC Networks Limited w.e.f. January 1, 2010 c) Other - Indirect Taj TV Limited, Mauritius

(ii) Associates Aplab Limited (extent of holding 26.42 %) Taking Entertainment Places Operational Review Governance & Financials 129

Standalone Financials Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts (iii) Other Related parties with whom transactions have taken place during the year and balance outstanding as on the last day of the year. Asian Sky Shop Limited, Agrani Convergence Limited; Churu Trading Company Private Limited; Continental Drug Company Private Limited; Cyquator Media Services Private Limited; Cornershop Entertainment Company Private Limited( up to December 31, 2009); Digital Media Convergence Limited ;(up to December 31, 2009); Dakshin Media Gaming Solutions Private Limited; Dish TV India Limited; Diligent Media Corporation Limited ; Essel Propack Limited; E-City Entertainment (India) Private Limited; E-City Retail Private Limited; E- City Property Management Services Private Limited; E-Cool Gaming Solution Private Limited; Essel Corporate Services Private Limited; Essel Sports Private Limited; Essel Infraprojects Limited; Essel Shyam Communication Private Limited; Fun Multiplex Private Limited; Integrated Subscribers Management Limited; ITX Trade Exchange Limited; Jay Properties Private Limited; Jayneer Capital Private Limited; Pan India Network Infravest Private Limited; Prajatma Trading Company Private Limited; Premier Finance and Trading Company Limited; Rama Associates Limited; Remed Services Private Limited (up to December 31, 2009);Real Media FZLLC, Smart Wireless Private Limited; TALEEM Research Foundation; Wire and Wireless (India) Limited; Zee News Limited;

Directors / Key Management Personnel Mr. Subhash Chandra, Mr. Punit Goenka, Mr. Laxmi Narain Goel, Mr. Ashok Kurien.

(iv) Transactions with Related Parties

(Rs./Thousand) Sr. Particulars 2010 2009 No. Amount Amount A) Fixed Assets / Capital work in progress Assets Purchased during the year Associates - 497

B) Investments Subsidiaries Balance as at April 1 12,614,923 12,613,773 Cancellation pursuant to the Scheme of Arrangement (Refer Note 3) 271,975 - Purchased/ adjusted during the year - 1,150 Balance as at March 31, 12,342,948 12,614,923

Other Related Parties Balance as at April 1, 1,533 1,533 Balance as at March 31, 1,533 1,533

Associates Balance as at April 1, 46,599 46,599 Balance as at March 31, 46,599 46,599

C) Sundry Debtors as at March 31, Subsidiaries 667,415 412,849 Other Related Parties 176,865 854,682

D) Loans, Advances and Deposits as at March 31, Subsidiaries 1,816,476 29,249 Other Related Parties 406,017 4,811,662

Capital Advances as at March 31, Other Related Parties 750,000 - 130 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts (Rs./Thousand) Sr. Particulars 2010 2009 No. Amount Amount E) Sundry Creditors as at March 31, Pending Remittance to Principals Subsidiaries 759,327 871,073 Purchase of Programs/ Goods and Services Subsidiaries 20,258 53,534 Other Related 655,084 175,508

F) Sale & Services Turnover Sale, Services and Recoveries (Net) Subsidiaries 900,777 955,474 Other Related Parties 73,054 275,251

Subscription Income Subsidiaries 34,374 - Other Related Parties 240,000 -

Advertisement Income (Net) Subsidiaries 11,700 6,186 Other Related Parties 169,949 99,479

Commission Received Subsidiaries 73,662 65,360 Other Related Parties - 268,368

G) Other Income Dividend Received Subsidiaries 12,224 12,224 Other Related Parties 5,466 2,186 Associates 1,321 3,303

Interest Received Subsidiaries 9,671 - Other Related Parties 815,442 885,087

Miscellaneous Income / Rent Income Subsidiaries 13,275 56,242 Other Related Parties 54,836 48,989

Balances Written Back Subsidiaries 12,624 -

H) Loans, Advances and Deposits Given Subsidiaries 358,000 - Other Related Parties 6,461,000 11,525,500

I) Purchase of Programs, Goods and Services Subsidiaries 118,546 65,332 Other Related Parties 398,368 688,282 Taking Entertainment Places Operational Review Governance & Financials 131

Standalone Financials Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts (Rs./Thousand) Sr. Particulars 2010 2009 No. Amount Amount Commission Paid Subsidiaries 140,610 145,993

J) Balances written off Subsidiaries 19,158 - Other Related Parties - 13,665

K) Loans and Advances repayment received Other Related Parties 11,341,000 7,620,400

L) Guarantees Corporate Guarantees Given Subsidiaries 5,008,850 1,565,100 Other Related Parties 4,077,030 4,526,760

Disclosure in Respect of Material Related Parties which account for 10% or more of the transactions during the year:

a) Loans, Advances and Deposits given include to Churu Trading Company Private Limited Rs./Thousand 2,040,000 (3,770,500); Prajatma Trading Company Private Limited Rs./Thousand 21,50,000 (2,170,000); Dish TV India Limited Rs./Thousand Nil (2,430,000); Wire and Wireless (India) Limited Rs./Thousand Nil (1,550,000); Premier Finance and Trading Company Limited Rs./Thousand 2,271,000 ( 1,605,000).

b) Loans, Advances and Deposits repayment received Churu Trading Company Private Limited Rs./Thousand 2,040,000 (3,770,500); Prajatma Trading Company Private Limited Rs./Thousand 2,150,000 (2,170,000); Dish TV India Limited Rs./Thousand 24,30,000 ( Nil);Wire and Wireless India Limited Rs./Thousand 2,450,000 (70,000); Premier Finance and Trading Company Limited Rs./Thousand 2,271,000 (1,605,000).

c) Loans, Advances and Deposits balances outstanding at year end include Zee Sports Limited Rs./Thousand 29,249 (29,249); Zee Turner Limited Rs./Thousand 1,747,620 ( Nil ); Dish TV India Limited Rs./Thousand Nil ( 2,430,000); Wire and Wireless India Limited Rs./Thousand 98,613 ( 2,300,817);Jay Properties Private Limited Rs./Thousand 65,744 (65,744);TALEEM Research Foundation Rs./Thousand 199,182 (Nil).

d) Capital Advances outstanding at the year end include Taleem Research Foundation Rs./Thousand 750,000 (Nil).

e) Sundry Creditors balances include Broadcasters/ Principals Remittances pending to Asia Today Limited Rs./Thousand 759,327 (869,628); Amounts due for Purchase of Programs, Goods and Services to Asia Today Limited Rs./Thousand 11,654 (12,448); Taj Television India Private Limited Rs./Thousand 8,232 (Nil); ETC Networks Limited Rs./Thousand Nil ( 41,085); Wire and Wireless (India) Limited Rs./Thousand 67,177 (92,984); Essel Sports Private Limited Rs./Thousand 13,624 ( 70,044); Zee News Limited Rs./Thousand 520,271(Nil).

f) Sales, Services and Recoveries (Net) include to Asia Today Limited Rs./Thousand 886,916 (929,083); Dish TV India Limited Rs./Thousand Nil ( 4,475); Zee News Limited Rs./Thousand 57,680 (245,694);Real Media FZ LLC. Rs./Thousand 2,649 (5,958); Subscription Revenue from Taj Television India Private Limited Rs./ Thousand 34,373(Nil); Dish TV India Limited Rs./Thousand 240,000 ( Nil) Advertisement Income from ETC Networks Limited Rs. 11,700 (Nil); Asian Sky Shop Rs./Thousand Nil (12,085); Dish TV India Limited Rs./ Thousand 96,409 ( 83,427); Cornershop Entertainment Company Private Limited Rs./Thousand 71,531 (6,186); Agency Commission received from Asia Today Limited Rs./Thousand 73,662 (65,360); Zee News Limited Rs./Thousand Nil (268,368).

g) Sundry Debtors balances include Asia Today Limited Rs./Thousand 665,345 (329,745); Zee TV USA Inc. Rs./Thousand Nil (62,976); Dish TV India Limited Rs./Thousand 95,257 (599,386); ITX Trade Exchange Limited Rs./Thousand 29,854 (Nil); Zee News Limited Rs./Thousand Nil (179,084).

h) Other income include Dividend received from ETC Networks Limited Rs./Thousand 12,224 ( 12,224); Aplab Limited Rs./Thousand 1,321 ( 3,303); Essel Propack Limited Rs./Thousand 546 (2,186); Interest received 132 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts includes Churu Trading Company Private Limited Rs./Thousand 219,469 (258,147); Prajatma Trading Company Private Limited Rs./Thousand 210,647 (256,625); Dish TV India Limited Rs./Thousand 71,901 (68,917); Premier Finance & Trading Co Private Limited. Rs./Thousand 186,326 (173,521); Wire and Wireless India Limited Rs./Thousand 127,098 (127,877); ETC Networks Limited Rs./Thousand 9,671(Nil); Miscellaneous / Rent income from Zee Turner Limited Rs./Thousand 10,627 (14,330); Asia Today Limited Rs./Thousand Nil (39,829); ETC Networks Limited Rs./Thousand 2,647 (2,083); Diligent Media Corporation Limited Rs./Thousand 2,203 (2,081); Dish TV India Limited Rs./Thousand 25,132 (25,132); Zee News Limited Rs./Thousand 20,441 (20,441); Wire and Wireless (India) Limited Rs./Thousand 4,209 (1,335); Balances written back of Asia Today Limited Rs./Thousand 12,624 (Nil).

i) Purchase of Programs, Goods and Services from Asia Today Limited Rs./Thousand 67,661 (59,212); ETC Networks Limited Rs./Thousand 16,039 (Nil); Taj TV Limited -Mauritius Rs./Thousand 30,861 (3,529); Essel Corporate Services Private Limited Rs./Thousand 176,292 (134,872); Essel Sports Private Limited Rs./Thousand 12,807 (262,603); Wire and Wireless (India) Limited Rs./Thousand 160,372 (250,321).; Commission paid to Zee Turner Limited Rs./Thousand 140,620 (145,992); Balances written off 25 FPS Media Private Limited Rs./Thousand Nil (13,665); Cornershop Entertainment Company Private Limited Rs./Thousand 19,158 (Nil).

j) Corporate guarantees include in respect Asia Today Limited Rs./Thousand 50,08,850 (1,565,100); Dish TV India Limited Rs./Thousand 3,223,530 (3,305,760); Wire and Wireless India Limited Rs./Thousand 541,000 (921,000).

Notes i. Details of Remuneration to directors are disclosed in Note 6 (e).

ii. Sharing of expenses has been disclosed in Note 6 (o).

13. Disclosure for the units of mutual fund bought and sold during the year

Sr. Face Name of the fund Quantity Amount No. value (Nos.) (Rupees) 1 Reliance Liquidity Fund-Daily Dividend reinvestment Option 10 5,004,299 50,064,506 2 UTI Money Market Mutual Fund-Institutional-Daily Dividend 1,000 99,725 100,062,127 3 ICICI Prudential Flexible Income Plan Premium-Daily Dividend 100 1,325,173 140,117,138 4 ICICI Prudential Liquid Super Institutional Plan-Daily Dividend 100 701,137 70,129,190 5 ICICI Prudential Liquid Plan Institutional Plus-Daily Dividend 10 3,376,057 40,011,339 6 IDFC Money Manager-Super Institutional Plan-Daily Dividend 10 10,011,722 100,132,236 7 Kotak Floater Long Term-Daily Dividend 10 9,933,573 100,128,433 8 LIC Mutual fund Floating Rate Fund - Short Term Plan-Daily 10 257,476,166 2,574,761,657 Dividend 9 LIC Mutual Fund-Dividend Plan 10 333,494,283 3,661,800,582 10 LIC Mutual Fund Savings Plus Fund-Daily Dividend Plan 10 80,091,016 800,910,159

14. Disclosures as required by the amendment to Clause 32 of the listing agreement vide SEBI circular no.2/2003 of January 10, 2003: a) Loans and Advances given to Subsidiaries (Rs./Thousand) Particulars Balance as at Maximum amount outstanding during the year

2010 2009 2010 2009 Zee Sports Limited 29,249 29,249 29,249 29,249 Zee Turner Limited 1,747,620 - - - Taj Television India Private Limited 39,537 - - - Asia Today Limited 70 - 70 - Taking Entertainment Places Operational Review Governance & Financials 133

Standalone Financials Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts b) Investments by Loanee in the shares of the Company as at March 31, 2010:

No. of fully No. of fully paid up paid up equity Loanee equity shares shares 2010 2009 Churu Trading Company Private Limited 3,576,000 3,576,000 Prajatma Trading Company Private Limited 7,574,500 7,574,500 Premiere Finance & Trading Company Limited 6,176,000 6,176,000

15. Additional Information required to be given pursuant to Part II of Schedule VI to the Companies Act 1956 is as follows: The Company is mainly in the business of producing television programs and is not subject to any license hence licensed capacity is not given. Further the nature of business of the Company is such that quantitative information of purchase, sale and stocks are not applicable.

a) Quantitative Information. Closing stock of educational materials and equipments: (Rs./Thousand)

Particulars 2010 2009 Qty. Amount Qty. Amount Educational materials and equipments (Received as per Scheme of Arrangement) Equipments 573,030 11,978 - - Others - 17,110 - - Total 573,030 29,088 - -

b) Consumption of Raw Stock (included in TV Program/Movies) (Quantity in numbers, Amount in Rs./Thousand) (Rs./Thousand)

Particulars 2010 2009 Qty. Amount Qty. Amount Raw Tapes 43,446 26,878 53,041 48,562 Total 43,446 26,878 53,041 48,562

c) Value of Imported and Indigenous Raw Stock consumed (% denotes Percentage, Amount in Rs./Thousand) (Rs./Thousand)

Particulars 2010 2009 % Amount % Amount Imported 1.60 429 9.80 4,761 Indigenous 98.40 26,449 90.20 43,801 Total 100.00 26,878 100.00 48,562 134 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts d) Other Information Rs./Thousand

Particulars 2010 2009 Earning in Foreign Exchange FOB Value of Exports 918,487 893,415 Broadcasting Revenue 52,856 34,632 Others 4,316 21,605 Remittances in Foreign Currency Net Dividend remitted 172,751 172,803 No. of Shareholders (Nos) 133 133 No. of Equity Shares held (Nos) 86,375,552 86,401,552 Expenditure in Foreign Currency (On Accrual Basis) Traveling expenses 6,411 4,970 Transponder rent and uplinking charges 111,624 64,485 Programming Expenses 20,379 31,175 Repairs and Maintenance 2,179 1,661 Interest expense 125 1,168 Others 7,808 20,082 CIF Value of Imports Capital Equipment 16,239 169,774 Stores 1,522 - Raw Stock 172 4,907 Taking Entertainment Places Operational Review Governance & Financials 135

Standalone Financials Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts 16. Earnings per share (EPS)

Sr. Particulars 2010 2009 No. a) Profit after Tax before Exceptional Item (Rs./Thousand) 5,588,403 3,071,640 b) Profit after Tax after Exceptional Item (Rs./Thousand) 5,588,403 3,097,446 Adjustment for the purpose of Diluted EPS: Add: Interest on Foreign Currency Convertible Bonds - 1,075 Less: Tax on above - 365 c) Profit after Tax before Exceptional Item for Diluted EPS (Rs./Thousand) 5,588,403 3,072,350 d) Profit after Tax after Exceptional Item for Diluted EPS (Rs./Thousand) 5,588,403 3,098,156 e) Weighted Average number of equity shares for Basic EPS (Nos.) 446,469,444 433,930,729 Add: Weighted Average outstanding option deemed to be issued for no - 1,083,712 consideration (Nos.) f) Weighted Average number of equity shares for Diluted EPS (Nos.) 446,469,444 434,726,859 Nominal value of equity shares (Re.) 1 1 g) Basic EPS before Exceptional Item (Rs.) 12.51 7.08 h) Basic EPS after Exceptional Item (Rs.) 12.51 7.14 i) Diluted EPS before Exceptional Item (Rs.) 12.51 7.07 j) Diluted EPS after Exceptional Item (Rs.) 12.51 7.13

17. Segmental Reporting The Financial Statements of the Company contain both the consolidated financial statements as well as the separate financial statements of the parent Company. Hence, the Company has presented the segmental information on the basis of the consolidated financial statements as permitted by Accounting Standard - 17.

As per our attached report of even date For and on behalf of the Board

For MGB & Co. Punit Goenka Managing Director Chartered Accountants Nemi Chand Jain Director Mohan Bhandari Partner Hitesh Vakil President & Chief Financial Officer

Place : Mumbai M Lakshminarayanan Company Secretary Dated : September 23, 2010 136 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Balance Sheet Abstract and Company's general business profile :

I. Registration Details Registration No. 28767 State Code 1 1

Balance Sheet Date 3 1 0 3 2 0 1 0 Date Month Year II. Capital raised during the year (Amount in ‘000) Public Issue Rights Issue N I L N I L Bonus Issue Private Placement N I L N I L

III. Position of Mobilisation and Deployment of Funds (Amount in ‘000) Total Liabilities Total Assets 2 9 4 4 2 3 1 9 2 9 4 4 2 3 1 9 Sources of Funds Paid-Up Capital Reserves and surplus 4 8 9 0 3 8 2 7 7 6 4 2 5 1 Share Application Money Secured loans N I L 5 8 5 0 3 8 Unsecured loans 6 0 3 9 9 2

Application of Funds Net Fixed Assets Investments 2 6 9 4 7 0 8 1 5 3 1 9 2 9 0 Net Current Assets Miscellaneous Expenditure 1 1 3 7 8 9 6 5 2

Other Assets Deferred Tax Assets N I L 4 9 3 5 4

IV. Performance of Company (Amount in ‘000) Turnover Total Expenditure 1 3 8 4 9 2 5 1 7 7 6 5 8 2 7 (*includes other income) + - Profit / Loss before Tax + - Profit / Loss after Tax + 6 0 8 3 4 2 4 + 5 5 8 8 4 0 3 Earnings Per Share before exceptional items (weighted) (Rs.) Dividend rate (%) 1 2 . 5 1 4 0 0

V. Generic Names of three principal products/services of Company (as per monetary terms) Items Code No. (ITC Code) 8 5 2 4 9 0 0 1 Product Description R E C O R D E D V I D E O C A S S E T T E S

As per our attached report of even date For and on behalf of the Board

For MGB & Co. Punit Goenka Managing Director Chartered Accountants Nemi Chand Jain Director Mohan Bhandari Partner Hitesh Vakil President & Chief Financial Officer

Place : Mumbai M Lakshminarayanan Company Secretary Dated : September 23, 2010 Taking Entertainment Places Operational Review Governance & Financials 137

Standalone Financials Consolidated Financials

Cash Flow Statement for the year ended March 31, (Rs. in ‘000)

2010 2009 A.CASH FLOW FROM OPERATING ACTIVITIES Profit before tax 6,083,424 3,761,904 Adjustments for : Depreciation 114,272 119,240 Share issue expenses written off 49 49 Provision for doubtful debts /advances and investments 31,705 63,249 Loss on Foreign exchange derivative contracts 27,820 443,519 Loss on sale/ discard of fixed assets (net) 77,396 3,352 Interest expense 147,434 272,428 Dividend income (19,376) (17,713) Interest income (891,886) (883,061) Operating profit before working capital changes 5,570,838 3,792,110 Adjustments for : (Increase)/ Decrease in trade and other receivables (2,163,386) 740,918 (Increase)/ Decrease in Inventories (1,301,846) (830,709) Increase / (Decrease) in trade and other payables 638,808 (885,726) Cash Generated from Operations 2,744,414 2,816,593 Direct taxes paid /refunded (net) (1,102,025) (1,001,881) Net Cash flow from Operating Activities 1,642,389 1,814,712

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets/Capital Work In Progress (211,718) (303,523) Purchase of Long Term Investments (1,000,000) (1,450) Purchase of Current Investments (8,638,117) - Sale of Current Investments 7,638,117 - Loans to others (7,810,183) (12,761,580) Loans repaid by others 12,541,000 13,163,499 Dividend received 19,376 17,713 Sale of fixed assets 9,919 3,192 Interest received 891,886 976,632 Net Cash flow from Investing Activities 3,440,280 1,094,483

C. CASH FLOW FROM FINANCING ACTIVITIES Dividend paid (including dividend tax) (1,013,807) (1,013,959) Interest paid (126,955) (274,730) Loss on Foreign exchange derivative contracts (27,820) (443,519) Proceeds from short term borrowings - 500,000 Proceeds from long term borrowings - 1,004,855 Repayments of short term borrowings (300,000) (1,143,262) Repayments of long term borrowings (1,397,980) (650,813) Payment under finance leases - (5,549) Net Cash flow from Financing Activities (2,866,562) (2,026,977) 138 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Cash Flow Statement for the year ended March 31, (Rs. in ‘000)

2010 2009 Net Cash Flow during the year (A+B+C) 2,216,107 882,218

Cash and Cash Equivalents at the beginning of the year 1,104,344 222,126

Cash and Cash Equivalents at the end of the year 3,320,451 1,104,344

Cash and Cash Equivalents transferred as per Scheme of Arrangement 317,541 -

Cash and Cash Equivalents at the end of the year 3,002,910 1,104,344

Notes to the Cash Flow Statement For the year ended March 31, 2010

1. Previous year's figures have been regrouped, recast wherever necessary. 2. Cash and Cash Equivalents at the end of the year: Cash in hand 3,146 1,764 Balances with Scheduled Banks in Current Accounts 204,038 1,102,160 Balances with Scheduled Banks in Deposit Accounts 2,625,896 68 Balances with Non Scheduled Banks in Current Accounts 15,017 352 Cheques in hand / transit 154,813 Total 3,002,910 1,104,344

As per our attached report of even date For and on behalf of the Board

For MGB & Co. Punit Goenka Managing Director Chartered Accountants Nemi Chand Jain Director Mohan Bhandari Partner Hitesh Vakil President & Chief Financial Officer

Place : Mumbai M Lakshminarayanan Company Secretary Dated : September 23, 2010 Taking Entertainment Places Operational Review Governance & Financials 139

Standalone Financials Consolidated Financials

Five Years financial highlights (Rs. in million) Consolidated Standalone Year Ending March 31 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006

Revenue Account Income from Operations 21,998 21,773 18,354 15,159 16,543 12,787 12,102 10,420 8,677 8,314 Total Expenses 15,863 16,293 12,931 11,955 13,848 7,476 8,493 6,334 6,556 7,525 Operating Profit 6,135 5,480 5,423 3,204 2,695 5,311 3,609 4,086 2,121 789 To Income from Operations 28% 25% 30 % 21% 16% 42% 30% 39% 24% 9% Other Income 1,220 1,572 1,138 747 640 1,062 1,051 1,019 614 510 PBIDT 7,355 7,053 6,561 3,951 3,335 6,373 4,660 5,105 2,735 1,299 Financial Expenses 332 1,339 516 334 188 175 779 430 189 140 Depreciation / Amortisation 285 310 232 185 360 114 119 106 85 148 Profit Before Tax & 6,738 5,403 5,813 3,432 2,787 6,083 3,762 4,569 2,461 1,011 Exceptional Items Exceptional Items - (26) 26 - (20) - (26) 26 - (19) Taxation 573 208 1,627 999 547 495 690 1,592 799 339 Profit After Tax & before 6,165 5,195 4,186 2,433 2,240 5,588 3,072 2,977 1,662 672 exceptional items Profit After Tax & before minority interest / share of profits/(losses) 6,165 5,221 4,160 2,433 2,260 5,588 3,097 2,951 1,662 691 in associates Add: Share of Results of (16) 1 5 10 (46) Associates Less: Minority Interest (195) 99 333 68 71 Profit After Tax for the year 6,344 5,124 3,832 2,375 2,143 5,588 3,097 2,951 1,662 691 To Total Income 27% 22% 20% 15% 12% 40% 24% 26% 18% 8% Dividend 1947 868 868 650 435 1947 868 868 650 435 Dividend Rate 400% 200% 200% 150% 100% 400% 200% 200% 150% 100%

Capital Account Share Capital - Equity 489 434 434 434 413 489 434 434 434 413 Share Application Money - Share Capital - Preference - Reserves & Surplus 37,811 33,561 28,177 25,747 20,873 27,764 22,996 20,849 18,918 15,037 Deferred Tax Balances (133) (113) (243) (75) (148) (49) (40) (66) 12 (6) Minority Interest (22) 948 1,117 818 458 Loan Funds 1,195 5,757 3,866 3,226 4,772 1,189 1,709 2,043 2,541 4,712

Capital Employed 39,340 40,587 33,351 30,150 26,368 29,393 25,099 23,259 21,904 20,156 Fixed Assets 19,587 18,093 15,605 14,841 12,948 2,695 1,583 1,285 1,054 1,153 Investments 3,203 1,271 2,516 2,326 3,024 15,319 13,496 13,495 13,459 13,448 Net Current Assets 16,550 21,223 15,230 12,981 10,384 11,379 10,021 8,480 7,391 5,549 Miscellanous Expenditure (to the 0 0 0 2 12 0 0 0 0 6 extent not w/o)

Capital Deployed 39,340 40,587 33,351 30,150 26,368 29,393 25,099 23,259 21,904 20,156 Closing market price per share 269 106 245 251 238 269 106 245 251 238 of Rs.1 Market capitalisation 131,356 46,157 106,072 108,674 98,372 131,696 46,157 106,072 108,674 98,372 140 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Performance Ratios - an analysis

Consolidated Standalone Year Ending March 31 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006

Financial Performance Advertisement Income/Income from Operations (%) 48.5 48.6 50.7 46.4 39.7 63.4 64.9 69.8 58.9 45.4 Subscription Income/Income from Operations (%) 44.9 41.5 40.5 43.9 43.4 26.6 18.5 16.4 19.1 21.2 Operating Profit/Income from Operations (%) 27.9 25.2 29.5 21.1 16.3 41.5 29.8 39.2 24.4 9.5 Other Income/Total Income (%) 5.3 6.7 5.8 4.7 3.7 7.7 8.0 8.9 6.6 5.8 Programming Cost/Income from Operations (%) 31.1 32.6 28.2 31.5 25.7 33.2 40.6 33.8 46.1 42.5 Personnel Cost/Income from Operations (%) 8.9 9.3 7.8 6.7 6.6 6.4 7.6 6.0 4.7 5.3 Selling and Admin Expenses/Income from Operations (%) 20.2 20.4 20.0 18.9 20.7 18.8 21.0 20.2 15.7 20.3 Total Operating Cost/Income from Operations (%) 72.1 74.8 70.5 78.9 83.7 58.5 70.2 60.8 75.6 90.5 Financial Expenses/Income from Operations (%) 1.5 6.2 2.8 2.2 1.1 1.4 6.4 4.1 2.2 1.7 Tax/Income from Operations (%) 2.6 1.0 8.9 6.6 3.3 3.9 5.7 15.3 9.2 4.1 PAT for the year/Total Income (%) 26.6 21.9 19.7 14.9 12.5 40.4 23.5 25.8 17.9 7.8 Tax/PBT (%) 8.5 3.8 28.0 29.1 19.6 8.1 18.3 34.8 32.5 33.6 Dividend Payout/PAT for the year (%) 31.6 16.9 22.6 27.4 19.3 35.0 28.0 29.4 39.1 59.7 Dividend Payout/Effective Networth (%) 5.1 2.6 3.0 2.5 2.0 6.9 3.7 4.1 3.4 3.2

Balance Sheet Debt-Equity ratio (Total loans/Eff. Networth) (%) 3.1 16.9 13.5 12.3 22.4 4.2 7.3 9.6 13.1 34.7 Current ratio (Current assets/Current liabilities) (x) 3.1 4.7 3.4 3.5 3.4 2.8 3.4 2.6 2.8 2.3 Capital Output Ratio (Inc from Ops/Eff. Capital employed) (x) 0.6 0.5 0.6 0.5 0.6 0.4 0.5 0.4 0.4 0.5 Fixed assets Turnover (Inc from Ops/Fixed assets) (x) 10.5 7.5 6.9 8.0 7.5 4.7 7.6 8.1 8.2 7.2 Cash & cash equivalents/Total Eff.capital employed (%) 15.3 4.7 5.7 3.2 4.9 10.2 4.4 1.0 0.2 1.3 RONW (PAT for the year/Eff. Networth) (%) 16.1 15.1 13.4 9.1 10.1 19.8 13.2 13.9 8.6 5.1 ROCE (PBIT/Eff. Capital employed) (%) 18.0 16.6 19.0 12.5 11.3 20.7 18.1 21.4 12.1 6.3

Per Share Data # Revenue per share (Rs.) 47.5 53.8 45.0 36.7 41.7 28.3 30.3 26.4 21.4 21.4 Dividend per share (Rs.) 3.98 2.00 2.00 1.50 1.00 3.98 2.00 2.00 1.50 1.00 Indebtedness per share (Rs.) 2.4 13.3 8.9 7.4 11.6 2.4 3.9 4.7 5.9 11.4 Book value per share (Rs.) 78.3 78.3 66.0 60.4 51.6 57.8 54.0 49.1 44.6 32.9 Earnings per share (after prior period adjustments) (Rs.) 14.2 11.8 8.8 5.5 5.2 PE Ratio -Price/EPS Ratio (Share Price as of March 31,) (x) 18.9 9.0 27.7 45.8 45.9 Taking Entertainment Places Operational Review Governance & Financials 141

Consolidated Financials

Auditors’ Report

To and liabilities of the merged undertaking are accounted The Board of Directors and surplus of Rs./Thousand 1,197,357 is taken to Zee Entertainment Enterprises Limited Securities Premium. c) Note 21 (B) in Schedule 18 regarding demerger of 1. We have audited the attached Consolidated Balance Sheet 9X Entertainment Channel business undertaking of of Zee Entertainment Enterprises Limited (“the Company”) 9X Media Private Limited to the Company as per the and its subsidiaries and associate Companies (“the Group”) Scheme of Arrangement approved by the Honorable as at March 31, 2010, the Consolidated Profit and Loss High Court at Mumbai and in pursuance thereof assets Account and the Consolidated Cash Flow statement for and liabilities of the merged undertaking are accounted the year then ended on that date, annexed thereto. These and deficit of Rs./Thousand 133,220 is adjusted in financial statements are the responsibility of the Company’s General Reserve. management. Our responsibility is to express an opinion on d) Note 21 (C) in Schedule 18 regarding Amalgamation these financial statements based on our audit. of its erstwhile subsidiary ETC Networks Limited with 2. We conducted our audit in accordance with the auditing the Company w.e.f. March 31, 2010 and demerger of standards generally accepted in India. Those standards Education business undertaking to Zee Learn Limited require that we plan and perform the audit to obtain reasonable as on April 1, 2010 as per the Composite Scheme of assurance about whether the financial statements are free of Amalgamation and Arrangement u/s 391 to 394 and material misstatements. An audit includes examining on a other applicable provisions, approved by the Honorable test basis, evidence supporting the amounts and disclosures High Court at Mumbai and effect thereof is given in in the financial statements. An audit also includes assessing these financial statements and resultant surplus of the accounting principles used and significant estimates Rs./Thousand 504,515 is taken to General Reserve made by the management, as well as evaluating the overall and demerger of Education business undertaking as on financial statement presentation. We believe that our audit April 1, 2010, hence effect not given in these financials. provide a reasonable basis for our opinion. 5. We report that the Consolidated Financial Statements 3. a) The financial statements of subsidiaries with total have been prepared by the Company in accordance assets (net) of Rs./Thousand 15,826,634 as at with the requirements of the Accounting Standard AS 21 March 31, 2010 and total revenues (net) of “Consolidated Financial Statements” and AS 23 “Accounting Rs./Thousand 9,816,627 for the year ended on that for Investments in Associates”, issued by the Institute of date have not been audited by us. These financial Chartered Accountants of India and on the basis of the statements have been audited by other auditors whose separate audited financial statements of the Company, its report has been furnished to us and in our opinion, in subsidiaries and associates. so far it relates to the amounts included in respect of 6. On the basis of information and explanations given to us and those subsidiaries, is based solely on the report of the on consideration of the separate audit reports on individual other auditors. audited financial statements of the Company, its subsidiaries b) The financial statements of associates for the year and associates and subject to Para (3) above, we are of the ended March 31, 2010 have been audited by other opinion that auditors whose report has been furnished to us. The a) The Consolidated Balance Sheet gives a true and fair loss of such associates considered for consolidation is view of the consolidated state of affairs of the Group as Rs./Thousand 16,285. Our opinion, in so far it relates at March 31, 2010; to the amounts included in respect of those associates, is based solely on the report of the other auditors. b) The Consolidated Profit and Loss Account gives a true and fair view of the consolidated result of operations of 4. Without qualifying our report, attention is drawn to: the Group for the year ended on that date; and a) Note 20(b) regarding receivable of Rs./Thousand c) The Consolidated Cash Flow Statement gives a true 270,181 claimed from a competing broadcaster, which and fair view of the consolidated cash flows of the is under litigation. In the opinion of the management, Group for the year ended on that date. based on the legal opinion, the said claim is considered For MGB & Co as good and recoverable. Chartered Accountants b) Note 21 (A) in Schedule 18 regarding demerger of Registration No- 101169W Regional General Entertainment Channels business Mohan Bhandari undertaking of Zee News Limited to the Company as Partner per the Scheme of Arrangement u/s 391 to 394 read Membership No. 12912 with Section 78, 100 to 103 approved by the Honorable Mumbai, September 23, 2010 High Court at Mumbai and in pursuance thereof assets 142 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Consolidated Balance Sheet as at March 31, (Rs. in ‘000)

Schedules 2010 2009 SOURCES OF FUNDS Shareholders’ Funds Share Capital 1 489,038 434,007 Reserves and Surplus 2 37,810,816 33,560,988 38,299,854 33,994,995 Minority Interest - 947,659

Loan Funds Secured Loans 3 590,727 5,261,451 Unsecured Loans 4 603,991 495,450 1,194,718 5,756,901

Total 39,494,572 40,699,555

APPLICATION OF FUNDS Fixed Assets 5 Gross Block 19,979,858 18,931,540 Less: Depreciation / Amortisation 1,500,944 1,508,466 Net Block 18,478,914 17,423,074 Capital work-in-progress 1,108,493 669,444 19,587,407 18,092,518

Investments 6 3,202,719 1,271,146

Deferred Tax Assets (Net) [Refer Note 25(c)] 132,649 112,828 Current Assets, Loans and Advances 7 Interest Accrued on Investments 1,973 - Inventories 4,712,608 4,576,349 Sundry Debtors 7,487,831 6,436,508 Cash and Bank Balances 5,864,478 1,926,334 Loans and Advances 6,322,594 14,087,139 24,389,484 27,026,330 Less: Current Liabilities and Provisions Current Liabilities 8 5,398,987 4,317,532 Provisions 9 2,441,178 1,485,786 7,840,165 5,803,318

Net Current Assets 16,549,319 21,223,012

Minority Interest 22,471 -

Miscellaneous Expenditure 10 7 51 (to the extent not written off or adjusted)

Total 39,494,572 40,699,555

Significant Accounting Policies and Notes to Accounts 18

As per our attached report of even date For and on behalf of the Board

For MGB & Co. Punit Goenka Managing Director Chartered Accountants Nemi Chand Jain Director Mohan Bhandari Partner Hitesh Vakil President & Chief Financial Officer

Place : Mumbai M Lakshminarayanan Company Secretary Dated : September 23, 2010 Taking Entertainment Places Operational Review Governance & Financials 143

Consolidated Financials

Consolidated Profit and Loss Account for the year ended March 31, (Rs. in ‘000)

Schedules 2010 2009 INCOME Sales and Services 11 21,997,825 21,773,097 Other Income 12 1,220,116 1,572,205 Total 23,217,941 23,345,302

EXPENDITURE

Operational Cost / Cost of Goods 13 9,452,041 9,809,652 Personnel Cost 14 1,963,281 2,031,154 Administrative and other Expenses 15 2,112,728 1,860,230 Selling and Distribution Expenses 16 2,335,158 2,591,618 Total 15,863,208 16,292,654

Operating Profit 7,354,733 7,052,648 Financial Expenses 17 331,404 1,339,098 Depreciation / Amortization 285,389 310,333 Profit Before Tax and Exceptional Items 6,737,940 5,403,217 Less - Provision for Dimunition in Value of Investment - (25,806) Profit before Tax and After Exceptional Items 6,737,940 5,429,023 Less - Provision for Taxation - Current Tax 1,119,196 1,501,077 - Deferred Tax 25,842 107,877 - Fringe Benefit Tax - 24,134 Add: Excess Provision written back 284,156 1,425,204 Add: MAT Credit Entitlement 288,424 - Profit after tax and before minority interest / share of results of associates 6,165,482 5,221,139 Add - Share of results of associates (16,285) 1,357 Less - Minority Interest (195,225) 98,870 Net Profit for the year 6,344,422 5,123,626 Net Profit for the year of Continuing Operations 6,333,175 5,131,294 Net Profit/ (Loss) for the year of Discontinuing operations 11,247 (7,668) Add - Balance brought forward 18,445,902 14,775,431 Amount Available for appropriation 24,790,324 19,899,057 APPROPRIATIONS Interim Dividends on Equity Shares 968,967 - Proposed Final Dividend on Equity Shares 977,795 868,014 Tax on Dividend 325,410 145,441 General Reserve 1,100,000 410,000 Capital Redemption Reserve - 29,700 Balance carried to Balance Sheet 21,418,152 18,445,902 Total 24,790,324 19,899,057 Earnings Per Share: (Rs.) Basic before Exceptional Item and discontinuing operations 14.18 11.77 Basic after Exceptional Item and discontinuing operations 14.21 11.81 Diluted before Exceptional Item and discontinuing operations 14.18 11.75 Diluted after Exceptional Item and discontinuing operations 14.21 11.79 (On distributable profits on shares outstanding)(Face Value Re 1)

Significant Accounting Policies and Notes to Accounts 18

As per our attached report of even date For and on behalf of the Board

For MGB & Co. Punit Goenka Managing Director Chartered Accountants Nemi Chand Jain Director Mohan Bhandari Partner Hitesh Vakil President & Chief Financial Officer

Place : Mumbai M Lakshminarayanan Company Secretary Dated : September 23, 2010 144 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedules to the Consolidated Balance Sheet as at March 31, (Rs. in ‘000)

2010 2009

SCHEDULE - 1 Share Capital [Refer Note 21 ]

Authorised 1,399,200,000(500,000,000) Equity Shares of Re 1/- each 1,399,200 500,000 Nil (2,500,000) Cumulative Redeemable Preference - 250,000 Shares of Rs.100/- each. 1,399,200 750,000

Issued, Subscribed and Paid up 434,007,111 Equity Shares of Re 1/- each fully paid up 434,007 434,007 (Out of the above 210,316,212 Equity shares of Re 1/- each fully paid up were allotted for consideration other than cash against acquistion of Investments.)

Share Capital Suspense Account [ Refer Note 21 ] 55,031 -

Total 489,038 434,007

SCHEDULE - 2 Reserves and Surplus

Debenture Redemption Reserve As per last Balance Sheet 29,700 - Less: Transfered pursuant to the Scheme of Arrangement [Refer Note 21] (29,700) - Add: Appropriated During the year - 29,700 - 29,700 Capital Redemption Reserve As per last Balance Sheet 71,168 71,168 Less: Transferred pursuant to the Scheme of Arrangement [Refer Note 21] 1,168 - 70,000 71,168 Securities Premium As per last Balance Sheet 10,351,708 10,288,554 Add : Received during the year 67,135 Add: Adjusted pursuant to the Scheme of Arrangement [Refer Note 21] 1,197,357 Less : Premium On Redemption of FCCB [Refer Note 16] 3,706 3,981 11,545,359 10,351,708 General Reserve Balance as per last Balance Sheet 4,479,194 4,069,194 Add: Adjusted pursuant to the Scheme of Arrangement [Refer Note 21] 387 - Add: Appropriated during the year 1,100,000 410,000 5,579,581 4,479,194

Foreign Currency Translation Reserve (802,277) 183,316

Profit and Loss Account 21,418,152 18,445,902

Total 37,810,816 33,560,988 Taking Entertainment Places Operational Review Governance & Financials 145

Consolidated Financials

Schedules to the Consolidated Balance Sheet as at March 31, (Rs. in ‘000)

2010 2009

SCHEDULE - 3 Secured Loans [Refer Note 15 ]

Debentures 500,000 500,000 Term Loan from Financial Institiution / Bank 60,000 2,824,977 Working Capital Finance from Banks 12,135 1,911,260 Vehicle Loans 17,917 25,214 Interest accrued and due 675 -

Total 590,727 5,261,451

SCHEDULE - 4 Unsecured Loans

Foreign Currency Convertible Bonds [Refer Note 16 ] - 195,450 Term Loan from Banks 600,000 - Short Term Loan From Bank - 300,000 Inter Corporate Deposits 3,515 - Interest accrued and due 476 -

Total 603,991 495,450 146 Zee Entertainment Enterprises Limited | Annual Report 2009-10 3,386 9,301 60,642 69,184 98,141 in ‘000) 639,889 210,373 31, 2009 1,149,413 15,182,745 17,423,074 As At March Rs. ( 83 Net Block 58,293 15,994 90,593 80,969 2010 As At 544,393 167,490 1,142,431 March 31, 16,378,668 18,478,914 17,423,074 - - 4,037 13,235 66,385 29,417 792,033 205,676 390,161 1,500,944 1,508,466 31, 2010 Up to March - 2,665 7,920 32,955 17,036 35,930 60,925 10,090 40,852 216,990 384,511 Deduction - 5,200 3,304 6,497 - year 76,990 37,273 13,263 13,903 - - for the 128,959 285,389 310,334 192 Depreciation 1,366 3,312 5,652 - - - 91,600 17,561 63,517 in ‘000) TOTAL 192 5,652 3,312 1,366 Rs. 63,517 17,561 91,600 ( ------Scheme of of Scheme Arrangement Arrangement 5,720 Acquisition on on Acquisition 9X [Refer Note 21] Note [Refer 51,247 45,527 -

------5,048 29,651 14,384 57,730 24,238 2009 As At 204,333 868,516 304,566 April 1, ETC 1,508,466 1,238,984

- 83 Accumulated depreciation - - - - - 192 71,528 20,031 1,366 3,312 5,652 2010 750,069 557,651 156,978 110,386 As At 40,353 11,841 17,990 1,934,464 March 31, RGEC 16,378,668 19,979,858 18,931,540 - 83 8,361 584 96,452 32,052 33,037 31,112 17,332 28,693 63,572 8,697 395,019 135,109 777,167 14,343 16,702 84,756 14,199 Deduction 414,046 274,682 782,812 TOTAL - - 83 ------584 8,697 14,199 14,343 84,756 16,702 274,682 414,046 9X 12,415 121,469 109,054 Scheme of of Scheme Arrangement Arrangement Gross Block Acquisition on on Acquisition [Refer Note 21] Note [Refer - - - 83 584 Gross block 6,258 3,019 6,359 1,715 8,003 13,953 43,590 14,055 93,065 36,872 30,694 779,617 ETC 191,522 117,676 Addition 1,227,035 1,411,439 2,770,064 ------

390 3,195 5,678 7,840 65,690 23,685 33,037 10,444 28,751 47,952

2009 As At 844,222 514,939 126,914 122,379 101,055 April 1, RGEC 2,017,929 15,182,745 18,931,540 16,225,048 Leasehold Land Building Equipment Software/ Knowledge Based Content Goodwill - On Consolidiation ^ Based Knowledge Software/ Trade Mark Plant & Machinery Furniture & Fixtures Vehicles T ot a l Previous Year Furniture and Fixtures TOT A L Vehicle Equipments Leasehold Improvements Buildings Plant and Machinery Leasehold Land Software/ Knowledge Based Content Based Knowledge Software/ Trade Mark Capital Work In Progress B) Tangibles Description A ) Intangibles Schedules to the Consolidated Balance Sheet as at March 31, SCHEDULE - 5 Fixed Assets - At cost Note :- a) ^ Arising on consolidation of ZEEL with its subsidiaries and ultimate subsidiaries. b) Building includes Rs./Thousand 114, the value of shares in a Co-operative Society. c) Part of Building has been given on Operating Lease. d) Assets vested on Amalgamation,demerger as follows : Description b) Tangibles a) Intangibles Taking Entertainment Places Operational Review Governance & Financials 147

Consolidated Financials

Schedules to the Consolidated Balance Sheet as at March 31, (Rs. in ‘000)

2010 2009

SCHEDULE - 6 Investments Long Term (at cost)

Quoted - Trade - In associates 1,321,200 (1,321,200) Equity Shares of Rs.10/- each of Aplab Limited 46,599 46,599 (Extent of holding 26.42%)

Add: Share of profit for previous years 18,833 20,780 Add: Share of profit/(Loss) for current year (16,285) 1,357 Less: Dividend received during the year (1,321) (3,303) {Market Value Rs. Thousand / 50,206 (98,297)} 47,826 65,433

Quoted - Non -Trade 1,800,000(1,800,000) Equity Shares of Rs. 2/- each of Essel Propack Limited 1,500 1,500 {Market Value Rs. Thousand / 78,120 (66,420)}

Unquoted - Trade 778,471(778,471) Equity Shares of Rs. 10/- each of Asianet Communication Limited 119,297 119,297 67,693 (67,693) Equity Shares of Rs. 10/- each of Asianet Infrasturcture Limited 10,373 10,373 423,082 (423,082) Equity Shares of Rs. 10/- each of Asianet Radio Private Limited 64,836 64,836 423,082 (423,082) Equity Shares of Rs. 10/- each of Asianet News Private Limited 64,836 64,836 23,436 (23,436), 7.25% Redeemable Non-cumulative Preference Shares of Re 1/- each 23 23 of Wire & Wireless (India) Limited Nil (28) 14% Unsecured Reedemable Optionally Convertible Debentures (OCD’s) of Cornershop Entertainment Company Private Limited of Rs.10,000,000 fully paid up. - 280,000

Unquoted - Trade Others 50 (50)Equity shares of Rs.10/- each of North Karnataka GSB Bank Limited 1 1 2,500 (2,500) Equity shares of Rs.10/- each of Samata Sahakari Bank Limited 63 63 3,000 (3,000) Equity Shares of Rs. 10/- each of Last Minute Media Private Limited 300 300 1,000 (1,000)Equity share of Rs.10/- each of Ecool Gaming Solutions Private Limited 5 5 1,000 (1,000) Equity Shares of Rs.10/- each of Pan India Network Private Limited 5 5 8% Certificate of Deposit (Non - Transferrable) with SICOM Limited 1,000,000 - National Savings Certificates 15 15 (Pledged with VAT Department]

Current Investments Unquoted 10 (Nil) NSE MIBOR (Non - Transferrable) Unsecured Redeemable Non Convertible 1,000,000 - Debentures of Rs. 10,00,00,000/- each of Edelweiss Finance & Investments Limited Nil (506,305) units of Rs. 10/- each of Principal Cash Management Fund Liquid - 5,064 Option - Daily Dividend Nil (2,042,115) units of Rs. 10 each of JM Money Manager Fund Super Plus Plan - - 20,430 Daily Dividend Nil (601,214) units of Rs. 10/- each of Reliance Medium Term Fund- Daily Dividend Plan - 10,278 9,000,000 (3,523,103) units of Rs. 10/- each of LIC MF Income Plus - Daily Dividend Plan 90,000 35,231 Nil(2,000,000) units of Rs. 10/- each of JM Fixed Maturity Plan Series VII - 18 Month Plan - 20,000 499,200(Nil) units of Rs. 10/- each of Kotak Floater - LT - Daily Dividend 5,032 -

5000 (Nil) Redeemable Preference Shares of USD 1000 each of Globex Fund Limited 225,151 - 148 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedules to the Consolidated Balance Sheet as at March 31, (Rs. in ‘000)

2010 2009

Immovable Property Freehold Land 573,456 573,456

Total 3,202,719 1,271,146 Note : All the above securities are fully paid up

SCHEDULE - 7 Current Assets, Loans and Advances A. Current Assets a) Interest Accrued on Investment 1,973 -

b) Inventories TV Programs and Movies - Unamortized 4,670,593 4,532,418 Raw Stock - Tapes 12,927 17,871 Stock - in - Trade 29,088 26,060 4,712,608 4,576,349 c) Sundry Debtors (Unsecured considered good unless otherwise stated) More than six months 3,916,723 3,146,063 Others 5,957,059 5,768,001 9,873,782 8,914,064 Less: Provision for Doubtful Debts 2,385,951 2,477,556 7,487,831 6,436,508 d) Cash and Bank Balances Cash in hand 14,427 16,263 Balances with Banks in Current Accounts 2,626,398 1,792,747 Balances with Banks in Deposit Accounts 2,807,639 112,791 Cheques in hand / transit 416,014 4,533 5,864,478 1,926,334 e) Loans and Advances Loans 1,291,806 8,861,962

Advances (Recoverable in cash or kind for value to be received) 4,175,642 5,145,081 Less:Provision for Doubtful Advances 139,063 88,663 4,036,579 5,056,418

Advance Direct Taxes(Net of Provisions) 474,082 - Advance Indirect Taxes 349,137 -

Deposits 170,990 168,759 6,322,594 14,087,139

Total 24,389,484 27,026,330 Taking Entertainment Places Operational Review Governance & Financials 149

Consolidated Financials

Schedules to the Consolidated Balance Sheet as at March 31, (Rs. in ‘000)

2010 2009

SCHEDULE - 8 Current Liabilities Sundry Creditors - For Goods 1,441,808 1,281,661 - For Expenses and other liabilities 2,933,874 1,968,720 Trade Advances / Deposits received 295,288 327,039 Amounts pending remittance to principles 720,750 732,533 Unclaimed dividend / Fixed Deposits 7,243 7,529 Interest accrued but not due 24 50

Total 5,398,987 4,317,532

SCHEDULE - 9 Provisions Provision for - Tax ( Net of Advances) - 327,502 - Retirement Benefits 171,083 142,766 Proposed Dividend (including tax) 2,270,095 1,015,518

Total 2,441,178 1,485,786

SCHEDULE - 10 Miscellanous Expenditure (to the extent not written off or adjusted)

Share Issue Expenses 7 51

Total 7 51 150 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedules to the Consolidated Profit and Loss Account for the year ended March 31, (Rs. in ‘000)

2010 2009

SCHEDULE - 11 Sales and Services Services - Advertisement 10,669,746 10,592,585 - Subscription 9,868,788 9,037,579 - Commission - Broadcasters 193,386 388,159 - Course fees and Materials 317,882 251,295 Sales - Products & Other Services 948,023 1,503,479

Total 21,997,825 21,773,097

SCHEDULE - 12 Other Income Dividend 9,957 13,387 Interest 1,080,961 1,255,697 Profit on sale of investment - in subsidiary - 191,923 - in associates - 4,590 Rent Income 56,921 52,776 Miscellaneous Income 72,277 53,832

Total 1,220,116 1,572,205

SCHEDULE - 13 Operational Cost A. Program/Movie Rights Opening Stock - TV Programs and Movies 4,532,418 2,441,848 Add: Acquired on Scheme of Arrangement [Refer Note 21] 1,679,199 - Add: Production / Acquisition of TV Programs and Movies 5,306,162 9,083,407 Less: Closing Stock - TV Programs and Movies 4,670,593 4,532,418 6,847,186 6,992,837 B. Telecast Cost / Other Direct Expenses Subscription Management Services 1,797,317 2,017,308 Telecast Cost 711,723 692,785 Education Centre operating expenses 41,258 54,441 2,550,298 2,764,534 C. Educational Materials and Equipments Opening Stock 26,060 25,365 Add: Purchases 57,585 52,976 Less: Closing Stock 29,088 26,060 54,557 52,281 9,452,041 9,809,652

SCHEDULE - 14 Personnel Cost Salaries, Allowances and Bonus 1,853,016 1,871,882 Contribution to Provident and other funds 67,007 78,073 Staff Welfare Expenses 43,258 81,199

Total 1,963,281 2,031,154 Taking Entertainment Places Operational Review Governance & Financials 151

Consolidated Financials

Schedules to the Consolidated Profit and Loss Account for the year ended March 31, (Rs. in ‘000)

2010 2009

SCHEDULE - 15 Administrative and Other Expenses Rent 197,886 200,644 Rates and Taxes 112,027 50,188 Repairs and maintenance - Building 3,200 9,249 - Plant and Machinery 20,394 37,297 - Others 30,340 34,603 Insurance 9,821 14,412 Electricity and Water Charges 58,390 69,752 Communication Expenses 108,712 110,662 Printing and Stationery 19,096 32,324 Miscellanous Expenses 76,769 58,044 Conveyence and Travelling Expenses 175,758 233,007 Vehicle Expenses 31,763 36,159 Service Charges / Expenses 65,626 100,212 Legal, Professional and Consultancy Charges 223,183 287,049 Auditors Remuneration 23,686 23,950 Provision for Doubtful Debts and Advances 162,395 235,577 Bad Debts and Advances written off 671,452 315,572 Loss on Sale/ Discard of Fixed Assets (Net) 122,181 11,467 Share Issue and Preliminary Expenses Written off 49 62

Total 2,112,728 1,860,230

SCHEDULE - 16 Selling and Distribution Expenses Advertisement and Publicity Expenses 980,640 1,016,734 Commission on Sales and Services 335,508 270,012 Business Promotion Expenses 1,019,010 1,304,872

Total 2,335,158 2,591,618

SCHEDULE - 17 Financial Expenses Interest on - Fixed Loan 107,969 210,575 - Bonds and Debentures 1,256 1,075 - Working Capital Loan 188,488 191,048 Discounting and Financing Expenses 64,402 47,667 Exchange Difference and Loss on Foreign Exchange derivative contracts (30,711) 888,733

Total 331,404 1,339,098 152 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule 18 Significant Accounting Policies and Notes to Accounts 1. Background: Zee Entertainment Enterprises Limited (hereinafter referred to as `the parent Company’, `the Company’ or `ZEEL’) together with its subsidiaries and associates (collectively known as “the Group”) derives revenue mainly from advertisements and subscription. The Group also generates revenue through sale of television softwares, movie distribution and Educational services.

2. Basis of Consolidation a) The Consolidated Financial Statements (CFS) of the Group are prepared under Historical Cost Convention under going concern basis in accordance with Generally Accepted Accounting Principles in India and the Accounting Standard -21 on “Consolidated Financial Statements” issued by the Institute of Chartered Accountants of India (ICAI), to the extent possible in the same manner as that adopted by the parent Company for its separate financial statements by regrouping, recasting or rearranging figures, wherever considered necessary.

b) The CFS is prepared using uniform accounting policies for transactions and other events in similar transactions except that : i. In case of Educational Materials / Equipments are valued at lower of cost or estimated net realizable value. Cost is considered based on average cost instead of First in First out (FIFO) basis. Such inventories represents 0.62% of total consolidated inventory of the group at the year end.

ii. In case of Zee TV USA and Taj TV Limited Mauritius liability on account of retirement benefit is provided on estimated basis as per local laws instead of actuarial basis. These liabilities represents 29.03% of total consolidated gratuity and leave encashment liability of the group as at the year end.

c) The consolidation of the financial statements of the parent Company and its subsidiaries is done to theextent possible on a line-by-line basis by adding together like items of assets, liabilities, income and expenses. All significant inter-group transactions, unrealized inter-company profits and balances have been eliminated in the process of consolidation. Minority interest in subsidiaries represents the minority shareholders proportionate share of the net assets and net income.

d) The CFS includes the Financial Statements of the parent Company and the subsidiaries (as listed in the table below). Subsidiaries are consolidated from the date on which effective control is acquired and are excluded from the date of transfer/disposal.

Name of the Subsidiaries Proportion of Country of Interest (including Incorporation beneficial interest) / Voting Power (either directly / indirectly or through Subsidiaries) Direct Subsidiaries ETC Networks Limited * Nil (50.18) India Taj Television India Private Limited 50(50) India Zee Turner Limited 74(74) India Zee Sports Limited 100(100) India Zee Multimedia Worldwide Limited 100(100) British Virgin Islands ZES Holdings Limited 100(100) Mauritius Indirect Subsidiaries Apac Media Venture Limited 100(100) Hongkong Asia Today Limited # 100(100) Mauritius Asia Business Broadcasting (Mauritius) Limited 100(100) Mauritius Taj TV Limited Mauritius 82.20(50.00) Mauritius Zee Multimedia Worldwide (Mauritius) Limited 100(100) Mauritius Zee Multimedia (Maurice) Limited 100(100) Mauritius Zee Sports International Limited 100(100) Mauritius Zee Sports Americas Limited 100(100) Mauritius Taking Entertainment Places Operational Review Governance & Financials 153

Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts

Name of the Subsidiaries Proportion of Country of Interest (including Incorporation beneficial interest) / Voting Power (either directly / indirectly or through Subsidiaries) Asia TV Limited 100(100) United Kingdom Expand Fast Holding (Singapore) Pte Limited 100(100) Singapore Zee Technologies (Guangzhau) Limited 100(100) China Zee Telefilms Middle East FZ LLC 100(100) United Arab Emirates Zee TV USA Inc. 100(100) United States of America Zee TV South Africa (Proprietary) Limited 100(100) South Africa ZES Entertainment Studios Limited 100(100) British Virgin Islands ZES Mauritius Limited 100(100) Mauritius ZES International Limited 100(100) United Kingdom Zee Motion Pictures Private Limited 100(100) India CIS Holding LLC 100(100) Russia OOO Zee CIS Limited 100(Nil) Russia Cornershop Entertainment Company Private Limited ^ Nil(Nil) India Digital Media Convergence Limited ^ Nil(Nil) India Cornershop Animation Company Private Limited ^ Nil(Nil) India Re-Med Services Private Limited ^ Nil(Nil) India

*Amalgamated with the Company effective March 31, 2010 (Refer Note 21)

# 50% held through wholly owned subsidiary

^ 100% shareholding is acquired by ETC Networks Limited* (ETC) and merged with ETC [Refer Note 21]. Subsequently ETC amalgamated with the Company [ Refer Note 21].

e) Associates The Group has adopted and accounted for Investments in Associate in these CFS, using the “Equity Method” as per AS -23 issued by ICAI.

Country of Name of the Associate Company Extent of Holdings Incorporation Aplab Limited 26.42% (26.42%) India

No adjustments are made for differences in accounting policy for inventories are valued on weighted average basis, Gratuity liability is not accounted on accrued basis and depreciation provided on fixed assets on written down value method in case of Aplab Limited.

3. Use of Estimates The preparation of financial statements requires the management to make estimates and assumptions that affectthe reported amounts of assets and liabilities, as of the date of the financial statements and the reported amount of revenue and expenses of the year. Actual results could differ from these estimates. Any revision to estimates is recognized prospectively in current and future periods.

4. Comparatives a) Previous years figures have been regrouped, rearranged or recasted wherever necessary to conform to this year’s classification. Current year’s figures are not comparable due to the restructuring [Refer Note 21] Figures in brackets pertain to previous year.

b) The CFS is not comparable, in view of Restructuring [Refer Note 21] and subsidiaries incorporated/ acquired during the current and previous year. 154 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts 5. Fixed Assets a) Goodwill on Consolidation Goodwill represents the difference between the group’s shares in the net worth of the subsidiary or an associate, and the cost of acquisition at the time of making the investment the subsidiary or the associate. Capital reserve represents negative goodwill arising on consolidation.

b) Intangible Assets Intangible assets comprises software (including implementation expenses), Trade Mark and Knowledge based content. These intangible assets are amortized on straight line basis based on the useful lives, which in management’s estimate represents the period during which economic benefits will be derived from their use.

c) Tangible Fixed Assets i. Fixed assets are stated at original cost of acquisition/ installation net of accumulated depreciation, amortization and impairment losses. The cost of fixed assets includes taxes, duties, freight and other incidental expenses related to the acquisition and installation of the respective assets. ii. Capital Work in progress is stated at the amount expended upto the date of Balance sheet including advances for capital expenditure. iii. Assets acquired under Finance Lease are capitalized and the corresponding lease liability is recorded at an amount equal to the fair value of the leased asset at the inception of the lease.

6. Impairment of assets At each Balance Sheet date, the Company reviews the carrying amount of fixed assets to determine whether there is an indication that those assets have suffered impairment loss. If any such indication exists, the recoverable amount of assets is estimated in order to determine the extent of impairment loss. The recoverable amount is higher of the net selling price and value in use, determined by discounting the estimated future cash flows expected from the continuing use of the asset to their present value.

7. Borrowing Costs Borrowing Costs attributable to the acquisition or construction of qualifying assets are capitalized as a part of the cost of such assets. All other borrowing costs are charged to revenue.

8. Depreciation / Amortization a) Depreciation is provided on tangible fixed assets, including on fixed assets acquired under finance lease, on straight- line method at the rates specified in Schedule XIV or at such higher rates as permissible under applicable law, so as to write off their costs over the estimated useful life of the assets.

b) Premium on Leasehold land and leasehold improvements are amortized over the period of Lease.

c) No part of goodwill arising on consolidation is amortized.

d) Intangible assets are amortized over the economic useful life as estimated by the management as under:

Assets Useful life ( in years) Computer Software/ Knowledge based Content 3 Trade Marks 10

9. Investments a) Long Term investments are carried at cost. Provision for diminution in value other than temporary is made. b) Current Investments are carried at cost or fair value whichever is lower.

10. Inventories:

a) TV Programs and Movie rights (Produced and acquired):

TV Programs and movie rights are carried at lower of unamortized cost or realizable value. Where the realizable value on the basis of its useful economic life is less than its carrying amount, the difference is expensed as impairment. Taking Entertainment Places Operational Review Governance & Financials 155

Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts i) Cost of reality shows / chat shows / events/ game shows etc. are fully expensed on telecast.

ii. TV Programs (other than (i) above) are amortized over three financial years from the year of telecast as per management estimates of future revenue potential

iii. Movie rights are amortized on a straight-line basis over the license period or 60 months from the date of purchase whichever is shorter.

b) Movie produced and acquired for distribution: The amortization pertaining to Domestic theatrical, International theatrical rights, television rights, music rights, video rights and others are made, based on management estimates of revenues from each of these rights i. Theatrical rights: - 70% cost is amortized over three months of theatrical release of movie and balance 30% in subsequent three quarters. ii. Satellite rights, Music rights, Home Video rights etc are expensed on sale.

iii. In case of Negative rights of movies 90% of cost is amortized as per b(i) above and 10% allocated to IPR is amortized over subsequent nine years.

c) TV programs and movies under production are stated at cost. Cost comprises of material cost, cost of services and other expenses incurred upto the date of balance sheet.

d) Raw Stock: Tapes are valued at lower of cost or estimated net realizable value. Cost is taken on First in First out (FIFO) basis.

e) Educational Materials/ Equipments are valued at lower of cost or estimated net realizable value. Cost means average cost.

11. Revenue Recognition a) Broadcasting revenue - Advertisement revenue (net of agency commission) is recognized when the related advertisement or commercial appears before the public i.e. on telecast. Subscription revenue is recognized on completion of service. b) Sales (includes licensing of TV Programs and movies) are recognized when the delivery is completed c) Services - Commission - Broadcaster includes commission on subscription, advertising canvassing i.e. space selling, revenue is recognized when the service is completed. Theatrical revenue from movies is recognized on receipt of reports. d) Sales are recognized when the risk and rewards of ownership are passed onto the customers, which is generally on dispatch of goods. e) In respect of education services, revenue is recognized over the duration of course. Franchise fees are recognized as and when installments are due. f) SMS Revenue is recognized on the basis of the counts generated by computer software. g) Dividend is recognized when the right to receive the dividend is unconditional.

12. Foreign Currency Transactions

a) Accounting of Transactions i. The functional currency of each entity in the group is its respective currency. Monetary assets and liabilities in foreign currencies are converted into functional currency at the rates of exchange prevailing at the Balance Sheet date. Transactions in the foreign currencies are converted into functional currency at the rates of exchange prevailing at the date of the transaction. ii. Foreign currency transactions are accounted at the exchange rates prevailing on the date of transactions. iii. Foreign currency monetary assets and liabilities at the Balance Sheet date are translated at the closing rate. Gain and losses on settlement/ translation of monetary assets and liabilities are recognized in the Profit and Loss Account. iv. Non - monetary items denominated in foreign currency are carried at cost. v. In respect of forward exchange contracts assigned to the foreign currency assets/ liabilities, the difference due to change in exchange rate at the inception of forward contract and date of the Balance Sheet is recognized in the Profit and Loss Account. Any profit or loss resulting on settlement/ cancellation of forward contract is recognized as income or as expense in the year it arises. 156 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts b) Translation and Exchange Rates Financial Statements of overseas non-integral operations are translated as under: i. Assets and Liabilities at the exchange rate prevailing at the end of the year. Depreciation is accounted at the same rate at which assets are converted. ii. Revenues and expenses at yearly average rates (except for inventories, deferred tax and depreciation are converted at opening/closing rates as the case may be). Off Balance Sheet items are translated into Indian Rupees at year-end rates. iii. Exchange differences arising on translation of non-integral foreign operations are accumulated in the Foreign Currency Translation reserve until the disposal of such operations.

13. Retirement Benefits Retirement benefit plans, pensions schemes and defined contribution plans, or funds are governed by the statutes of the countries in which subsidiaries are located and contribution to the fund, future liability on actuarial valuation or liability on termination are charged to Profit and Loss Account. Accrued liabilities for leave encashment are made by the parent and its subsidiaries wherever applicable based on unavailed leave to the credit of employees in accordance with the rules of the respective companies. Incase of a subsidiary, the gratuity fund benefits are administered by a specific Trust formed and annual contributions are deposited under group policy scheme of Life Insurance Corporation of India (LIC).

14. Miscellaneous Expenditure Share issue and Preliminary expenses are amortized over a period of ten years.

15. Secured Loans Debentures 500 Secured Redeemable Non-Convertible Debentures of Rs. 1,000,000 each fully paid up (issued by erstwhile ETC Networks Limited) are redeemable at par in four equal installments with the earliest redemption being on January 6, 2012 and last being on January 6, 2015. Secured by way of first charge on all fixed assets and current assets including certain fixed deposits, and first charge on escrow account for receivables of the erstwhile subsidiary ETC Networks Limited. The debentures are to be further secured by assignment of all the benefits accruing under the agreement with a Charitable Trust for operations of school.

Term Loan from Bank Secured by way of first charge on all the fixed assets and current assets of erstwhile subsidiary Digital Media Convergence Limited. The loan has since been repaid.

Working Capital Loan from Bank Secured by way of first charge on all the fixed assets and current assets of erstwhile subsidiary Digital Media Convergence Limited. The loan has been since repaid.

Vehicle Loans Hire purchase and lease finance is secured by hypothecation of specific assets underlying the hire purchase / lease.

16. Foreign Currency Convertible Bonds (FCCB) a) The Company had issued 10,000 0.5% Foreign Currency Convertible Bonds (FCCB) of US$10,000 each aggregating to US$100 million, redeemable on April 29, 2009 at 116.24% of their principal amount. The bond holders have an option to convert these bonds into equity shares from and including June 8, 2004 to and including April 22, 2009 at an initial conversion price of Rs.197.235 per share, with a fixed rate of exchange on conversion of Rs. 43.88 (US$1). Consequent to the restructuring, the conversion price has been reset to Rs. 153.459 per share in terms of the Offering Circular, effective April 18, 2008.

b) During the year 379 bonds are redeemed on due date i.e. April 29, 2009 and paid on redemption and premium paid on redemption of Rs./Thousand 3,706 has been provided and adjusted against Securities Premium as per Section 78 of the Companies Act, 1956.

17. The erstwhile subsidiary Company ETC Networks Limited has entered into a tripartite agreement with a Charitable Trust / Society established under the Bombay Public Trust Act, 1950 and a Company to acquire exclusive rights for providing educational infrastructure, content, advisory and other related services to its school for a period of 30 years for Rs./ Thousand 750,000 and sharing revenue. Rs./Thousand 750,000 paid for acquiring the rights is included in capital work in progress and other preoperative cost of Rs./Thousand 24,600 eventually to be capitalized as an intangible asset on the date of commencement of operations by the school, to be amortised over the period of the right. Taking Entertainment Places Operational Review Governance & Financials 157

Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts 18. The erstwhile subsidiary Company ETC Networks Limited has taken over running business of Entertainment Television Network Private Limited during the year 1999-2000 along with the benefits of contracts, agreement and approvals for broadcasting of Television Channels. Some of the agreements and approvals are yet to be transferred / received in the name of erstwhile ETC.

19 a) TV Program and movie rights are intangible assets as defined in AS - 26 but these are used for broadcasting business hence considered and included under inventories.

b) In Schedule 13, Operational Cost includes Production and Acquisition Cost of TV Program and movie rights and movies amortized / impaired, sold etc. The Company has impaired TV program and movie rights of Rs./Thousand 69,881 (Nil) during the year.

20. Debtors a) Debtors are stated in the Balance Sheet at net realizable value. Net realizable value is the invoiced amount less provision for bad and doubtful debtors. Provisions are made specifically against debtors where there is evidence of a dispute or an inability to pay or recoverability. b) The Group has recognized a receivable of Rs./Thousand 270,181 (313,046) claimed from competing broadcaster for recovery of the telecast rights money relating to the sports event, which is under litigation. In the opinion of management and based on legal opinions, the receivable is considered as good.

21. Restructuring: A) Acquisition of Regional General Entertainment Channel Business Undertaking of Zee News Limited: a) The Scheme of Arrangement under Section 391 to 394 and other applicable provisions of the Companies Act, 1956 between Zee News Limited (ZNL) and the Company their respective shareholders and creditors was sanctioned by the Hon’ble Bombay High Court at Mumbai on March 19, 2010 and the said order filed with the Registrar of Companies on March 29, 2010. Pursuant to the Scheme, the Regional General Entertainment Channel (RGEC) Business Undertaking of ZNL comprising of six television channels namely Zee Marathi, Zee Talkies, Zee Bangla, Zee Telugu , Zee Kannada, and Zee Cinemalu (broadcasting yet to be commenced), assets of Zee Gujrathi, a discontinued television channel was demerged from ZNL, transferred and vested with the Company with effect from January 1, 2010.

b) The said Scheme has been given effect in these financial statements and in pursuance of the Scheme:

i. The assets and liabilities of RGEC Business Undertakings are transferred to and recorded in the books of accounts of Company at their respective book values and the difference (surplus) is credited to Securities Premium account as under:

Particulars Rs./Thousand Fixed Assets 63,897 Deferred Tax Assets 25,952 Current Assets , Loans and advances: Inventories 1,681,356 Sundry Debtors 1,251,107 Cash and Bank Balances 86,664 Loans and Advances 546,324 3,565,451

Total Assets 3,655,300

Secured and Unsecured Loans 1,144,371 Current Liabilities and Provisions 1,263,095 2,407,466

Total Liabilities 2,407,466

Net Assets 1,247,834

Less: Shares to be issued and alloted 50,477

Surplus taken to Securities Premium account 1,197,357 158 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts ii. 50,476,622 equity shares of Re 1/- each at par to be allotted to the equity share holders of Zee News Limited (ZNL)in the ratio of Four equity shares of the Company for every Nineteen equity shares of ZNL. Pending issue and allotment of shares as at the balance sheet date Rs./Thousand 50,477 has been credited to Share Suspense Account.

iii. The value of inventories of RGEC are written down by Rs./Thousand 115,030 on account of difference in the relevant accounting policy of ZEEL and ZNL, and debited to General Reserve.

B) Acquisition of the 9X Channel Business Undertaking of 9X Media Private Limited: i. The Scheme of Arrangement (‘the scheme’) under Section 391 to 394, read with sections 78, 100 to 104 of the Companies Act 1956 between 9X Media Private Limited (“Transferor Company”) and the Company and their respective shareholders and creditors was sanctioned by the Hon’ble High Court at Mumbai on September 9, 2010, and the said order filed with Registrar of Companies on September 22, 2010. Pursuant to the Scheme, the 9X Channel Business Undertaking (9X) of 9X Media Private Limited is demerged and vested with the Company on appointed date i.e. March 31, 2010 on a going concern basis at book values complying with the conditions and provisions of Section 2(19AA) of the Income Tax Act, 1961. ii. The Scheme has been given effect in these financial statements and in pursuant to the Scheme the assets and liabilities of 9X Business undertaking are transferred to and recorded in the books of the Company at their respective book values and difference (deficit) is adjusted to General Reserve as under :

Particulars Rs./Thousand Fixed Assets 70,222

Current Assets , Loans and advances: Sundry Debtors 34,487 Loans and Advances 404,619 439,106

Total Assets 509,328

Secured and Unsecured Loans 600,477 Current Liabilities and Provisions 41,930 642,407

Total Liabilities 642,407

Net Assets (133,079)

Less: Shares to be issued and alloted 141

Surplus taken to General Reserve account (133,220)

140,845 Equity Shares of Re 1 (Rupee one) each are to be issued and allotted to the shareholders of 9X Media Private Limited as on June 30, 2010 in the ratio of One equity share of the Company for every Seventy One Equity Shares of Rs.10/- each held in 9X. Pending issue and allotment of shares, Rs. 140,845 has been credited to Share Suspense Account

C) Amalgamation of ETC Networks Limited with the Company and Demerger of Education Business Undertaking from the Company:

i. The Composite Scheme of Amalgamation and Arrangement (“the composite scheme”) between erstwhile ETC Networks Limited (“ETC”) the Company Zee Learn Limited (“ZLL”) and the Company and their respective shareholders and creditors was approve by the Hon’ble High Court of Mumbai on July 16, 2010 and the said order filed with the Registrar of Companies on August 30, 2010. Pursuant to the Scheme the erstwhile ETC has merged and vested in the Company at fair values on the Appointed date i.e. March 31, 2010. And upon such merger, the Education Business Undertaking from the Company was demerged and vested with Zee Learn Limited on the Appointed Date April 1, 2010. Taking Entertainment Places Operational Review Governance & Financials 159

Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts ii. The Scheme has been given effect in these financial statements and in pursuant to the Scheme

a) The assets and liabilities of ETC are transferred to/and are accounted in the books of accounts of the Company at fair values on March 31, 2010 and the difference (surplus) is credited to General Reserve as under:

Particulars Rs./Thousand Fixed Assets 971,139 Deferred Tax Assets 49,301 Investments 95,100 Current Assets , Loans and advances: Inventories 34,695 Sundry Debtors 214,175 Cash and Bank Balances 317,542 Loans and Advances 466,677 1,033,089

Total Assets 2,148,629

Secured and Unsecured Loans 935,119 Current Liabilities and Provisions 432,607 1,367,726

Total Liabilities 1,367,726

Net Assets 780,903

Less: Cancellation of Investments 4,889,584 Equity shares of 271,975 Rs.10 each held in ETC Networks Limited

Less: Shares to be issued and alloted 4,413

Surplus taken to General Reserve 504,515

Had the Scheme not prescribed this treatment, Rs./Thousand 504,515 would have been credited to Capital Reserve as required by the Purchase Method prescribed by Accounting Standard (AS) 14 on “ Accounting for Amalgamations”.

b) 4,413,488 Equity shares of Re 1 each to be issued to the shareholders of ETC, as on the record date, in the ratio of ten equity shares of Re 1 each of the Company for every eleven equity shares Rs.10 each of ETC. Pending issue and allotment of shares, Rs./Thousand 4,413 has been credited to Share Suspense Account.

c) The authorized share capital of the Company stand increased by the amount of authorized share capital of the ETC of Rs. 649,200,000.

iii. Demerger of the Education Business Undertaking of the Company vested in to Zee Learn Limited as on April 1, 2010 pursuant to the Scheme:

i. The whole of the undertaking, assets, properties and liabilities of the Education Business undertaking demerged and vested in at book values with effect from appointed date i.e. April 1, 2010. Accordingly, this scheme has not been given effect to, in these financial statements. 160 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts ii. Upon the Scheme becoming effective, the Company shall transfer the whole of the undertaking with assets and liabilities of the Education Business undertaking on April 1, 2010 to the resulting Company ZLL. The difference between the book value of assets and the book value of liabilities transferred to the General Reserve of the Company as under :

Particulars Rs./Thousand Fixed Assets 800,655 Investments 5 Current Assets , Loans and advances: Inventories 29,088 Sundry Debtors 12,100 Cash and Bank Balances 207,010 Loans and Advances 236,636 484,836

Total Assets 1,285,495

Secured and Unsecured Loans 500,190 Current Liabilities and Provisions 154,012 654,202

Total Liabilities 654,202

Difference to be adjuted in General Reserve 631,293

iv. In consideration of the transfer and vesting of the Education Business undertaking to ZLL, the members of the Company holding four fully paid up Equity shares of Re 1/- each in the Company on the record date will be issued one fully paid up Equity shares of Rs. 1/- each of ZLL.

D) Acquisition / Amalgamation of four indirect Subsidiaries by/with ETC Networks Limited (ETC) Cornershop Entertainment Company Private Limited (CECPL), Cornershop Animation Company Private Limited (CACPL) , Digital Media Convergence Limited (DMCL) and RE-MED Services Private Limited (REMED) (all the four indirect wholly owned subsidiaries acquired by ETC w.e.f. Decemebr 17, 2009) have been amalgamated with ETC w.e.f. January 1, 2010 (“appointed date”) pursuant to the Scheme of Arrangement (“the Scheme”) sanctioned by the Honorable High Court at Mumbai on April 16, 2010 and filed with the Registrar of Companies on April 29, 2010 Pursuant to the Scheme deficit arising out of the net assets transferred after considering adjustment for difference in accounting policies is adjusted against General Reserve. Accordingly Rs./Thousand 255,879 have been transferred to General Reserve.

22. Disclosure in accordance with Accounting Standard (AS) - 24: Demerger of Education Business Undertaking from the Company into Zee Learn Limited with appointed date from April 1, 2010 Pursuant to the Composite Scheme of Amalgamation and Arrangement as referred in Note 21 C. Following is the disclosure as required by AS 24 :

i. Carrying amount of assets and liabilities of continuing and discontinuing operations:

2010 2009 Particulars Continuing Discontinuing Continuing Discontinuing Operations Operations Operations Operations Total Assets 46,049,242 1,285,495 45,776,227 726,646 Total Liabilities 8,380,681 654,202 11,878,593 629,282 Taking Entertainment Places Operational Review Governance & Financials 161

Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts ii. Revenue and expenses of continuing and discontinuing operations:

2010 2009 Particulars Continuing Discontinuing Continuing Discontinuing Operations Operations Operations Operations Income 23,085,444 327,723 23,107,210 265,255 Expenditure 16,179,688 316,598 17,769,230 271,725 Profit/ (Loss) Before Tax 6,905,756 11,125 5,337,980 (6,471) Tax Benefit / Expenses 572,581 (122) 206,686 1,197 Profit/ (Loss) After Tax 6,333,175 11,247 5,131,294 (7,668)

iii. Cash flows from continuing and discontinuing operations:

2010 2009 Particulars Continuing Discontinuing Continuing Discontinuing Operations Operations Operations Operations Net Cash From / (used in): Operating Activity 6,690,098 377,117 993,917 7,801 Investing Activity 4,848,346 (296,724) (340,035) (458,038) Financing Activity (7,845,829) (295) (429,041) 499,706 Net Increase or (decrease in cash and cash 3,692,614 80,099 224,843 49,468 Equivalent)

23. aCQUISITIONS During the year Zee Sports International Limited indirect subsidiary of the Company has increased its shareholding in Taj TV Limited Mauritius from 50% to 82.2% by an additional investment of USD 31.32 million Goodwill arising on consolidation is USD 28.7 million.

24. Loans The Group has been deploying its surplus funds as short-term demand loans / inter corporate deposits, the parties are regular in repayment of principal and interest, hence are considered good.

25. Taxation

a) Current income tax is calculated on the results of individual companies in accordance with local tax regulations.

b) Deferred tax is recognized, subject to consideration of prudence in respect of deferred tax assets, on timing difference, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods and measured using tax rates and laws enacted.

c) The components of the deferred tax balances as on March 31, are as under: (Rs./Thousand)

Sr. Particulars 2010 2009

i. Deferred Tax Assets Arising on account of timing differences in Retirement Benefit 39,280 33,080 Provision for doubtful debts 213,323 238,962 Allowable on payment basis 29,690 4,562 Unabsorbed fiscal allowances 27,622 4,631 Other Provisions 13,997 6,679 Total 323,912 287,914 ii. Deferred Tax Liabilities Depreciation 144,279 146,574 Other Provisions 46,984 28,512 Total 191,263 175,086 Deferred Tax Assets (Net) 132,649 112,828 162 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts 26. Leases a) Finance Lease: Long-term leases, which in economic terms constitute investments financed on a long-term basis (finance lease) are recognized as assets and recorded under tangible fixed assets at their cash purchase value. The minimum lease payments required under this finance lease that have initially or remaining non cancellable lease terms in excess of one year as at March 31, 2010 and its present value are as follows. Reconciliation of minimum lease payments and present value: (Rs./Thousand)

Particulars 2010 2009

Minimum Lease Payments as at Not Later than one year 1,378 1,557 Later than one year and not later than five year 2,882 4,815 Later than five years Total 4,200 6,372 Less: Amount representing Interest 597 1,087 Present value of Minimum Lease payment 3,603 5,285 Less: Amount due not later than one year 1,070 1,107 Amount due later than one year and not later than five years 2,533 4,178

b) Operating Leases: Lease of assets under which all the risk and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments/revenue under operating leases are recognized as expense/income on accrual basis in accordance with the respective lease agreements. Leasing liabilities primarily relate to lease of certain offices, residential premises, and other facilities. The initial tenure of the lease is generally is for 4 to 96 months. The minimum rental payables under other operating leases that have initially or remaining non-cancellable lease term in excess of one year as at March 31, 2010 are as follows: (Rs./Thousand)

Particulars 2010 2009 Lease rental charges for the year 562,077 564,641 Future Lease rental obligation payable (Under non-cancellable lease) Not later than one year 372,847 222,975 Later than one year but not later than five years 938,296 347,451 Later than five years 120,516 246,191

c) In respect of assets given under operating lease. i. The Company has given part of building under cancellable operating lease agreement. The initial term of the lease is for 12 months.

ii The rental revenue for the year is Rs./Thousand 56,921 (52,776).

27. a) Contingent Liabilities (Rs./Thousand) Sr. Particulars 2010 2009 No. a) Corporate guarantees for other related parties, loan outstanding 4,467,176 4,526,760 Rs./Thousand 3,733,360 (3,949,415) b) Bank/Counter guarantees outstanding 1,605 3,630 c) Letter of Credit (Net of Liabilities Provided) 509,427 406,327 d) Claims not acknowledged as debts 640,319 141,364 e) Legal cases against the Company Unascertainable Unascertainable f) Disputed Direct Taxes 287,308 354,946 g) Disputed Indirect Taxes 631,098 Nil Taking Entertainment Places Operational Review Governance & Financials 163

Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts b) Estimated amount of contracts remaining to be executed on capital account (Net of Advances) 264,619 Rs./Thousand (726,856).

28. During the year, Company’s expense of Rs./Thousand 166,797 (63,160) are shared by other related party, are netted off in relevant heads of expenses.

29. Capital work in progress includes Capital Advances Rs./Thousand 1,119,997 (512,373). Enforceable agreements are yet to be executed for advances of Rs./Thousand 239,370 for purchase of properties.

30. Sundry Creditors for expenses and other liabilities under Current Liabilities include Rs./Thousand 494,061 payable to Zee News Limited on demerger of RGEC channels for liabilities paid on Company’s behalf.

31. Prior period expenses/ income included in respective heads in the Profit and Loss Account is as under

(Rs./Thousand)

Particulars 2010 2009 Program cost 10,392 - Interest on Income Tax Refund written back - 23,400 Business Promotion Expenses - 7,605 Subscription Revenue - (1,562) Prior Period Expense (net) 10,392 29,443

32. Related Party Disclosure- i. List of Parties where control exists The list of subsidiaries is disclosed in Note 2 (d)

ii. Associate Companies

Extent of Country of Name of the Associate Company Holdings Incorporation Aplab Limited 26.42% India

iii. Other Related Parties with whom transactions have taken place during the year and balances outstanding as on the last day of the year: Agrani Wireless Services Limited, Asian Sky Shop Limited, Buddha Films Limited, Cyquator Technologies Limited, Churu Trading Company Private Limited, Continental Drug Company Private Limited, Cornershop Entertainment Company Private Limited( up to December 31, 2009), Digital Media Convergence Limited, (up to December 31, 2009); Dakshin Media Gaming Solutions Private Limited, Delgrada Limited, Diligent Media Convergence Limited, Diligent Media Corporation Limited, Dish TV India Limited, E City Entertainment Private Limited, E-city Property Management Services Private Limited, E-city Films Limited, Electronic Media Advertisement Limited, Essel Corporate Resources Private Limited, Essel Corporate Services Limited, Essel Infraproject Limited, Essel Propack Limited, Essel Shyam Communication Limited, Essel Shyam Technoligies Limited, Essel Sports Private Limited, Esselship Breaking Limited, Essel Sports Private Limited, Intrex India Limited, Jay Properties Private Limited, Natural Wellness Limited, New Media Broadcasting Private Limited, Pan India Network Infrawest Private Limited, Pan India Network Limited, Pan India Paryatan Limited, Prajatama Trading Company Private Limited, Premier Finance and Trading Company Limited, Quickcalls India Private Limited, Remed Services Private Limited (up to December 31, 2009), Rama Associates Limited, Real Media FZLLC, Resource Software Limited (upto April 1, 2010), Scrapetta Investments Limited, Sun City Projects Limited, TALEEM Research Foundation, Turner International India Private Limited, Wire & Wireless (I) Limited, Zee Akaash News Private Limited, Zee News Limited. 164 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts Directors / Key Management Personnel Mr. Subhash Chandra, Mr. Punit Goenka, Mr. Laxmi Narain Goel, Mr. Ashok Kurien.

Transactions during the year with related parties (Rs./Thousand) Sr. Particulars 2010 2009 No. Amount Amount

A Fixed Assets / Capital work in progress/Capital Advances Other Related Parties 750,000 452,570

B Investments Other Related Parties Balance as at March 31, 1,533 281,533

Associates Balance as at March 31, 47,827 65,433

C Sundry Debtors as at March 31, Other Related Parties 1,595,418 890,887

D Loans, Advances and Deposits Given as at March 31, Other Related Parties 417,760 10,479,529

E Sundry Creditors as at March 31, Other Related Parties 1,248,624 450,433

F Loans, Advances and Deposits Received as at March 31, Other Related Parties 6,792 -

G Debentures Other Related Parties - 280,000

H Sale and Services Turnover Sale, Services and Recoveries (Net) Other Related Parties 779,376 655,664

Advertisement Income (Net) Other Related Parties 168,271 99,479

Commission Received Other Related Parties 57,785 268,368

I Other Income Dividend Received Other Related Parties 546 2,186 Associates 1,321 3,303

Interest Received Other Related Parties 963,102 1,059,694

Rent/Miscellaneous Income Other Related Parties 54,836 48,989 Taking Entertainment Places Operational Review Governance & Financials 165

Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts (Rs./Thousand) Sr. Particulars 2010 2009 No. Amount Amount J Share of Profit/(Loss) in Associates (16,285) 1,357

K Purchase of Programs, Goods and Services Other Related Parties 1,373,236 1,748,679

L Other Expenses Interest Paid Other Related Parties 85 -

Remuneration and Consultancy fees paid Key Management Personnel 37,161 30,192

M Sale (Buyback) of Investments in Associates - 1,319,455

N Acquisition of Minority Interest in Subsidiary Other Related Party - 2,399,566

O Loans, Advances and Deposits Given Other Related Parties 8,036,510 12,413,758

P Purchase of Fixed Assets/CWIP/Capital Advances Other Related Parties 297,430 452,570

Q Purchase of Investments Other Related Parties - 280,000

R Loans ,Advances and Deposits Received Other Related Parties - 569,459

S Loans and Advances repayment received Other Related Parties 16,857,059 7,900,400

T Corporate Guarantees Given Other Related Parties 4,467,176 4,526,760

Note : Disclosure in Respect of Material Related Party who account for 10% or more of the transactions during the year:

a) Capital Advance given to TALEEM Research Foundation Rs./Thousand 297,430 (452,570)

b) Share of Loss in associates includes from Aplab Limited Rs./Thousand -16,285 (1,357)

c) Sale, Services and Recoveries includes to Dish TV India Limited Rs./Thousand. 511,717 (83,427), Wire and Wireless Limited Rs./Thousands 91,552(88,766), Zee News Limited Rs./Thousand 98,320(262,334). Advertisement Income include to Zee Akaash News Private Limited Rs./Thousand 11,112 (Nil), Dish TV India Limited Rs./Thousand 96,410 (83,427) Cornershop Entertainment Company Private Limited (up to December 31, 2009) Rs./Thousand 59,832 (779). Agency Commission Received from Zee News Limited Rs./Thousand 57,634 (268,368);

d) Purchase of Programmes, Goods and Services include from Turner International India Private Limited Rs./Thousand 532,692 (454,750) , Wire and Wireless (I) Limited Rs. 161,540 (266,093), Real Media FZLLC Rs./ Thousand 286,669 (429,923), Essel Corporate Resources Private Limited Rs./Thousand 180,042, (149,796)

e) Managerial remuneration paid to Key Management Personnel Mr. Subhash Chandra Rs./Thousand 3,803(3,925) and to Mr. Puneet Goenka Rs./Thousand 33,358(26,267) 166 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts f) Other Income Include, Dividend received from Essel Propack Limited Rs./Thousand 547 (2,186), Aplab Limited Rs./Thousand 1,321 (3,303). Interest Received From Churu Trading Company Private Limited Rs./Thousand 219,469 (258,147), Premier Finance and Trading Company Limited Rs./Thousand 187,778 (192,548), Prajatma Trading Company Private Limited Rs./Thousand 210,647 (256,625), Wire and Wireless (I) Limited Rs./ Thousand 143,461 (141,902), Delgrada Limited Rs./Thousand 97,499 (139,265). Rent/Miscellaneous Income from Dish TV India Limited Rs./Thousand 25,132 (25,132) , Zee News Limited Rs./Thousand 20,441(21,441).

g) Interest Expenses paid to Churu Trading Company Private Limited Rs./Thousand 85 (Nil).

h) Loans and Advances given includes Churu Trading Company Private Limited Rs./Thousand 2,040,000(3,770,500), Delgrada Limited Rs./Thousand 998,182 (Nil), Prajatama Trading Company Private Limited Rs./Thousand 2,150,000 (2,170,000), Premier Finance and Trading Company Limited Rs./Thousand 2,271,000 (1,885,000)

i) Loans and Advances repayment received includes, Churu Trading Company Private Limited Rs./Thousand 2,040,000 (3,770,500), Dish TV India Limited Rs./Thousand 2,430,000 (Nil), Premier Finance and Trading Company Private Limited Rs./Thousand 2,311,300 (1,885,000), Prajatma Trading Company Private Limited Rs./Thousand 2,150,000 (2,170,000), Wire and Wireless (India) Limited Rs./Thousand 2,450,000 (70,000), Delgrada Limited Rs./Thousand 2,695,211(Nil)

j) Capital advances outstanding include TALEEM Research Foundation Rs./Thousand 750,000 (452,570)

k) Investments at year end includes investment in equity of Essel Propack Limited Rs./Thousand 1500 (1500)

l) Sundry Debtors Balances outstanding include, receivable from Dish TV India Limited Rs. 1,481,000 (600,162)

m) Loans & Deposits received include, Cyquator Technologies Rs./Thousand 3,277 (Nil), Essel Ship Breaking Limited 2,967(Nil)

n) Sundry Creditors balances include amount due to Zee News Limited Rs./Thousand 705,659 (47,318),Turner International India Private Limited Rs./Thousand 260,395 (292,074)

o) Corporate Guarantee includes Dish TV India Limited 3,223,530 (3,305,760) and Wire and Wireless Limited 541,000 (921,000)

p) Balance of loans given TALEEM Foundation 199,182(Nil), Jay Properties Private Limited 65,745(Nil), Wire and Wireless Limited 98,613 (938)

33. Segment Information The Group follows AS -17 “Segment Reporting” relating to the reporting of financial and descriptive information about their operating segments in financial statements.

The Group’s reportable operating segments have been determined in accordance with the internal management structure, which is organized based on the operating business segments as described below.

Broadcasting and content (B & C), which principally consists of developing, producing and procuring television programming and film content and delivering via satellites, thereby earning revenues by way of advertisement and subscription revenues and syndication.

Education, which principally consists of distribution of software learning products, imparting education and training in IT.

Film Production which principally consists of Production and distribution of films. Taking Entertainment Places Operational Review Governance & Financials 167

Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts a) Business Segment (Financial Year 2009-2010)

(Rs./Thousand)

Description B & C Education Film Elimination Total Production SEGMENT REVENUE External Sales 21,534,184 317,882 145,759 - 21,997,825 Inter-segment Sales Total Revenue 21,534,184 317,882 145,759 - 21,997,825

SEGMENT RESULT 6,268,970 2,647 (316,925) - 5,954,692

Operating Profit before interest and Tax 5,954,692 Interest Expenses 297,713 Interest Income 1,080,961 Profit before Tax and Exceptional Item 6,737,940 Exceptional Items - Profit before Tax and After Exceptional Item 6,737,940 Current Taxes - Current year 830,772 Earlier year (284,156) Deferred Tax Benefit/(Expense) - Current year 25,842 Profit after tax 6,165,482 Share in result of associates (16,285) Minority Interest (195,225) Net Profit 6,344,422

Business Segment (Financial Year 2008-2009)

(Rs./Thousand)

Description B & C Education Film Elimination Total Production SEGMENT REVENUE External Sales 21,190,986 251,295 330,816 - 21,773,097 Inter-segment Sales Total Revenue 21,190,986 251,295 330,816 - 21,773,097

SEGMENT RESULT 4,487,481 (16,481) (114,094) - 4,356,906

Operating Profit before interest and Tax 4,356,906 Profit on Sale of Investments in associates 4,590 Profit on Sale of Investments in Subsidiaries 191,923 Interest Expenses 405,899 Interest Income 1,255,697 Profit before Tax and Exceptional Item 5,403,217 Exceptional Items (25,806) Profit before Tax and After Exceptional Item 5,429,023 Current Taxes - Current year 1,525,211 Previous year (1,425,204) Deferred Tax Benefit/(Expense) - Current year 107,877 Profit after tax 5,221,139 Share in result of associates 1,357 Minority Interest 98,870 Net Profit 5,123,626 168 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Schedule Significant Accounting Policies and Notes to Accounts (b) Other Segment Information (Financial Year 2009-2010)

(Rs./Thousand)

Description B & C Education Film Unnallocated Elimination Total Production Segment Assets 40,115,907 1,285,495 534,871 5,474,844 (76,380) 47,334,737 Segment Liabilities 7,469,487 654,202 987,574 (76,380) 9,034,883 Capital Expenditures 1,519,602 330,874 1,850,476 Depreciation / Amortisation 275,200 8,358 1,831 285,389 Other Non Cash expenditures 210,795 17,983 55,847 284,625

Other Segment Information (Financial Year 2008-2009)

(Rs./Thousand)

Description B & C Education Film Unnallocated Elimination Total Production Segment Assets 35,603,635 726,646 823,314 10,254,987 (905,709) 46,502,873 Segment Liabilities 3,782,699 629,282 954,097 8,047,509 (905,709) 12,507,875 Capital Expenditures 2,336,478 466,274 14,203 2,816,955 Depreciation / Amortisation 300,357 8,243 1,733 310,333 Other Non Cash expenditures 208,306 6,817 - 215,123

Revenue by Geographical Market The geographical segments considered for disclosure are India and Rest of World. a) The revenues are attributable to countries based on location of customers (Rs./Thousand)

Particulars 2010 2009 India 12,762,457 13,111,777 Rest of World 9,235,368 8,661,320

b) Segment assets and liabilities are disclosed based on the countries of incorporation of respective companies. (Rs./Thousand)

Segment Assets Capital Expenditures

2010 2009 2010 2009 India 28,201,600 29,682,765 587,833 949,159 Rest of World 19,133,137 16,820,102 1,262,643 1,867,796 Taking Entertainment Places Operational Review Governance & Financials 169

Consolidated Financials

Schedule Significant Accounting Policies and Notes to Accounts 34. Earning Per Share In accordance with AS - 20 “Earnings Per Share” issued by ICAI, basic earnings per share are computed using the weighted average number of shares outstanding during the year. (Rs./Thousand)

Particulars 2010 2009 a. Profit for the year before Exceptional Item (Rs./Thousand) and discontinuing 6,333,175 5,105,488 operations b. Profit for the year after Exceptional Item (Rs./Thousand) and discontinuing 6,344,422 5,123,626 operations Adjustment for the purpose of Diluted EPS: Add: Interest on Foreign Currency Convertible Bonds - 1,075 Less: Tax on above - 365 c. Profit for the year before Exceptional Item for Diluted EPS (Rs./Thousand) and 6,344,422 5,106,198 discontinuing operations d. Profit for the year after Exceptional Item for Diluted EPS (Rs./Thousand) and 6,333,175 5,124,336 discontinuing operations e. Weighted Average number of equity shares for Basic EPS (Nos.) 446,469,444 433,930,729 Add: Weighted Average outstanding option deemed to be issued for no - 1,083,712 consideration (Nos.) f. Weighted Average number of equity shares for Diluted EPS (Nos.) 446,469,444 434,726,859 Nominal value of equity shares (Re) 1 1 g. Basic EPS before Exceptional Item (Rs.) and discontinuing operations 14.18 11.77 h. Basic EPS after Exceptional Item (Rs.) and discontinuing 14.21 11.81 i. Diluted EPS before Exceptional Item (Rs.) and discontinuing 14.18 11.75 j. Diluted EPS after Exceptional Item (Rs.) and discontinuing 14.21 11.79

As per our attached report of even date For and on behalf of the Board

For MGB & Co. Punit Goenka Managing Director Chartered Accountants Nemi Chand Jain Director Mohan Bhandari Partner Hitesh Vakil President & Chief Financial Officer

Place : Mumbai M Lakshminarayanan Company Secretary Dated : September 23, 2010 170 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Consolidated Cash Flow Statement for the year ended March 31,

(Rs. in ‘000)

2010 2009 A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit before taxation and exceptional items 6,737,940 5,403,217 Adjustments for : Depreciation 285,389 310,333 Share issue/ Preliminary expenses written off 49 62 Provision for doubtful debts/advances and investments 162,395 235,577 Loss on sale of fixed assets 122,181 11,467 Exchange adjustments (net) (1,563,254) 1,251,208 Interest expense 297,713 405,899 Loss on Foreign Exchange derivative contracts 27,820 443,519 Profit on Sale of Investments - In Subsidiary (191,923) Profit on Sale of Investments - in Associate (4,590) Dividend income (9,957) (13,387) Interest income (1,080,961) (1,255,697) Operating profit before working capital changes 4,979,315 6,595,686 Adjustments for : Increase in trade and other receivables 2,159,390 (2,916,865) Increase in Inventories 1,545,097 (2,102,571) Increase / (Decrease) in trade and other payables (261,965) 182,615 Cash Generated from Operations 8,421,837 1,758,864 Direct taxes paid (net) (1,354,622) (757,146) Net Cash flow from Operating Activities 7,067,215 1,001,718

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets/Capital Work In Progress (628,555) (594,408) Acquistion of Minority Interest (1,410,751) (2,399,566) Purchase of Investments - Long Term (1,000,000) (280,300) Purchase of Investments- Short Term (5,185,951) (71,003) Loans to others (1,340,021) (13,691,098) Loans repaid by others 8,673,120 13,163,499 Dividend received 11,278 16,690 Sale of fixed assets 55,000 11,254 Sale of Investment in Subsidiary - 103,979 Sale of investment in Associate - 1,319,455 Sale of Investments - Long Term 280,000 10 Sale of Investments - Short Term 3,956,772 274,148 Interest received 1,140,731 1,349,268 Net Cash flow from Investing Activities 4,551,622 (798,073)

C. CASH FLOW FROM FINANCING ACTIVITIES Dividend paid (including dividend tax) (1,017,883) (1,015,976) Interest paid (297,739) (408,201) Loss on Foreign Exchange derivative contracts (27,820) (443,519) Increase / (decrease) in minority interest - (20,493) Proceeds from short term borrowings - 499,958 Proceeds from long term borrowings - 2,947,505 Repayments of short term borrowings (300,000) (1,143,262) Repayments of long term borrowings (6,202,682) (345,345) Net Cash flow from Financing Activities (7,846,124) 70,665 Taking Entertainment Places Operational Review Governance & Financials 171

Consolidated Financials

Consolidated Cash Flow Statement for the year ended March 31,

(Rs. in ‘000)

2010 2009 Net Cash Flow during the year (A+B+C) 3,772,713 274,311 Cash and Cash Equivalents at the beginning of the year 1,926,334 1,652,024 Cash and Cash Equivalents transferred as per scheme of arrangement 165,431 -

Cash and Cash Equivalents at the end of the year 5,864,478 1,926,334

Cash and Cash Equivalents at the end of the year 5,864,478 1,926,334

Notes to the Cash Flow Statement For the year ended March 31, 2010

1. Previous year's figures have been regrouped, recast wherever necessary. 2. Cash and Cash Equivalents at the end of the year: Cash in hand 14,427 16,263 Balances with Scheduled Banks in Current Accounts 2,626,398 1,792,747 Balances with Scheduled Banks in Deposit Accounts 2,807,639 112,791 Balances with Non Scheduled Banks in Deposit Accounts - Balances with Non Scheduled Banks in Current Accounts Cheques in hand / transit 416,014 4,533 Total 5,864,478 1,926,334

As per our attached report of even date For and on behalf of the Board

For MGB & Co. Punit Goenka Managing Director Chartered Accountants Nemi Chand Jain Director Mohan Bhandari Partner Hitesh Vakil President & Chief Financial Officer

Place : Mumbai M Lakshminarayanan Company Secretary Dated : September 23, 2010 172 Zee Entertainment Enterprises Limited | Annual Report 2009-10 ------R ubles OOO Zee CIS Limited - 2,182 5,714 (912) LLC 1,908 GBP (3,532) (4,982) (4,070) 67.8500 76.0700 Holdings Zee (CIS) - - 58 171 1,138 (142) (142) (Rs. in ‘000) H K D APAC Media 7.7647 (1,025) Limited 7.7544 Ventures - Zee 30,642 A ED FZLLC 258,632 308,094 (80,104) 597,236 110,418 110,418 Telefilms 12.2570 12.9957 Middle East Managing Director For and on behalf of the Board Punit Goenka 0 - 4,652 7.3926 7.8473 66,576 36,019 36,019 156,904 Limited Zee TV (152,252) R A NDS South Africa (Proprietary) 2,814 (369) 3,576 3,945 44,249 63,756 16,692 USD 45.0301 47.7447 114,931 Holdings (Singapore) Pte. Limited Expand Fast 4,503 24,269 28,661 45.0301 47.7447 975,262 USD 494,016 170,988 142,327 Limited 1,004,034 Director (Mauritius) N C Jain Broadcasting Asia Business (764) 45,075 79,703 Inc. USD 45.0301 47.7447 145,651 (111,023) (205,255) (204,491) 2,533,800 Zee TV USA (5,185) GBP 67.8500 76.0700 (20,983) (15,798) Asia TV (618,248) 1,115,331 1,861,124 1,364,041 Limited, UK 1,000,268 5,234 2,466 6.8361 6.8382 74,434 32,094 (2,502) (2,502) Zee (71,666) Y U A N Limited (Guangzhou) Technologies - - 45 80 523 (488) Zee (199) (199) USD Sports Limited 45.0301 47.7447 Americas 45 8,028 45.0301 47.7447 USD Limited 4,537,898 4,529,825 (100,924) (100,924) 1,000 6,528 8,400 Zee Sports International 40,631 (1,872) 620,191 578,560 178,632 0 0 237 (237) (134) (134) (Rs. in ‘000) ZES GBP 67.8500 76.0700 Limited International Private Limited Taj Television (I) 0 93 315 (223) - - (141) (141) ZES USD 82 14 Limited 45.0301 47.7447 Mauritius 100 (32) (23) (23) 45 139 (679) (495) (457) (457) 45.0301 47.7447 ZES USD Studios BVI Entertainment Private Limited Private ------Zee Motion Pictures Pictures Motion Zee 989 723 180 (446) (127) (127) ZES USD 45.0301 47.7447 Limited 500 Holdings 13,269 57,470 (44,701) (16,831) (16,831) Limited Zee Sports (9,809) USD 45.0301 47.7447 763,260 423,503 Taj TV Mauritius (167,655) 1,019,108 (362,257) (352,448) 2,867,767

- - 1 117 1,000 (384) (384) 20,482 Zee Rs. 12,503 (29,928) (50,410) 31.8636 32.1995 Limited (12,387) (575,257) (Maurice) 2,255,004 2,829,261 2,039,434 Multimedia Mauritius Limited Zee Turner 198 5,758 Zee 27,335 USD (2,151) (2,349) 771 45.0301 47.7447 671,841 Limited Worldwide (Mauritius) 1,194,198 1,893,374 Multimedia 12,993 12,222 652,599 45 Limited 46,577 45.0301 47.7447 USD Limited 9,698,276 4,950,892 1,073,962 4,059,825 1,027,385 Asia Today 14,649,213 (Refer Note 21) ETC Networks - - 2 (621) (621) Zee USD 45.0301 47.7447 143,160 Worldwide Multimedia 7,974,632 8,117,794 Limited, BVI Mumbai September 23, 2010 : : Place Dated Functional Currency Conversion Rates Balance Sheet Summary Profit & Loss Account Turnover Profit Before Tax Profit & Loss Summary Balance Sheet Share Capital Provision for Tax Profit after Tax Reserve & Surplus Proposed Dividend Total Assets Total Liabilities Investments (excluding subsidiaries) Reserve & Surplus Total Assets F in a nci l H ighlights As on Ma rch 31, 2010 INDIAN SUBSIDIARIES Particulars Share Capital Summary Balance Sheet Total Liabilities Investments (excluding (excluding Investments subsidiaries) Summary Profit & Loss Account Turnover Profit Before Tax Provision for Tax Profit after Tax OVERSEAS SUBSIDIARIES Proposed Dividend 173

Notes 174 Zee Entertainment Enterprises Limited | Annual Report 2009-10

Notes ZEE ENTERTAINMENT ENTERPRISES LIMITED Registered Office : Continental Building, 135, Dr. Annie Besant Road, Worli, Mumbai - 400 018. ATTENDANCE SLIP 28th Annual General Meeting

I hereby record my presence at the 28th Annual General Meeting of the Company at Nehru Centre, Nehru Auditorium, Dr. Annie Besant Road, Worli, Mumbai - 400 018. on Friday, October 29, 2010 at 10.30 a.m.

...... Name of the Shareholder/Proxy (inBLOCK LETTERS) Signature of Shareholder/Proxy

Folio No......

DP ID No......

Client ID No......

No. of Shares ......

NOTE : Shareholder/Proxy holder wishing to attend the meeting must bring the Attendance Slip to the meeting and handover the same at the entrance, duly signed.

ZEE ENTERTAINMENT ENTERPRISES LIMITED Registered Office:Continental Building, 135, Dr. Annie Besant Road, Worli, Mumbai - 400 018. PROXY FORM 28th Annual General Meeting

I/We...... of ...... being member/ members of ZEE ENTERTAINMENT ENTERPRISES LIMITED hereby appoint ...... of ...... or failing him/her ...... of ...... as my/our proxy to vote for me/ us on my/our behalf at the 28th Annual General Meeting of the Company to be held on Friday, October 29, 2010 at 10.30 a.m. at Nehru Centre, Nehru Auditorium, Dr. Annie Besant Road, Worli, Mumbai - 400 018, and at any adjournment(s) thereof, if any. Signed this ______day of August, 2009.

Signature of Shareholder ...... Re 1/- Folio No...... Revenue Stamp DP ID No......

Client ID No......

No. of Shares ......

NOTE: The Proxy completed in all respect must be deposited at the Registered Office of the Company not less than 48 hours before the commencement of the Annual General Meeting.

Zee Entertainment Enterprises Limited Continental Building, 135, Dr. Annie Besant Road, Opp. Doordarshan Tower, Worli, Mumbai - 400018. Tel - 022 24831234 / 24815653 Fax - 022 24900302

Regional offices International offices Other offices

New Delhi USA Ten Sports / Taj TV B - 10, Essel House, Lawrence Road, Industrial Asia TV USA Ltd 403, Manish Commercial Centre, Dr. A B Road, Area, New Delhi - 110035 One Penn Plaza, 250 W, 34th Street, Suite 3501, Worli - 400030 New York, NY 10119 Tel - 011 27101145 / 54 Tel - 022 66623101 / 2 / 3 Fax - 011 27192172 Tel - +1 646 747 9101 Fax - 022 66626290 Fax - +1 646 745 9090 / 9102 Kolkata Broadcast operations - ETC United Kingdom 5 A/1 & 5 A/2, 5th Floor, Park Plaza, 71 Park Street, 7B, Shah Industrial Estate, Off. Veera Desai Road, Kolkata - 700016 Asia TV Ltd Andheri (W), Mumbai - 400053 Unit 7, Belvue Business Centre, Belvue Road, Tel - 033 22275458 / 5459 Tel - 022 67813737 Northoit, Middlesex, UB5 5QQ, London, Fax - 033 22275463 Fax - 022 26185383 United Kingdom. Hyderabad Tel - +44 020 88394000 Broadcast Operation Fax - +44 020 8841 9550 Filmcity 19, Sector 16-A, Noida - 201301 6-2-929 DB Enclave, Raj Bhavan Road, Khairtabad, Hyderabad - 500004 Tel - 0120 2511064 South Africa Tel - 040 23320139 / 23320770 1st Floor, 109 Atrium Terraces, 272 Oak Avenue, Fax - 040 23320164 Ferndale, Randburg, South Africa. Tel - +27 117813352 Pune Fax - +27 117813347 Swastik Apartments, Gulmohar Lane, Off Law College, Opp. Nirmiti Showroom, Erandawane, Mauritius Pune - 411004 2nd Floor, Ebene House, 33, Cybercity Ebene, Telefax - 020 25422049 Mauritius Tel - +230 4642222 / 6666 Chennai Fax - +230 4644040 Alpha Centre, Essel House, 3rd Floor, No. 150 & 151, North Usman Road, T - Nagar, China Chennai - 600017 RM 1906 East Tower, Fortune Plaza, 116 Tiyu East Tel - 044 28144964 Road, Guangzhou, China - 510620 Fax - 044 28144963 Tel - +86 2038931510 Fax - +86 2038931503 Bangalore 204, 2nd Floor, H. M. Geneva House, 14, Malaysia Cunningham Road, Bangalore - 560052 Level 16, 1 Sentral Jalan, Stesen Sentral 5, KL Tel - 080 22373183 / 84 / 85 / 86 Sentral 50470, Kuala Lampur , Malaysia. Fax - 080 22373180 Tel - +603 20929297 Fax - +603 20929201

Singapore Expand Fast Holdings (Singapore Pte Ltd) 500, Rifle Range Road, # 01-09 Bukit Timah Satellite, Earth Station, Singapore - 588397 Tel - +65 64652406 Fax - +65 64668837

Dubai Zee Network “Zee Tower”, Office No. 106, Next to DMC Bldg. No. 9, Dubai Media City, P.O. Box 500484, Dubai, U.A.E. Tel - +971 44264100 Fax - +971 43625386

russia (moscow) OOO Zee CIS 115419, Moscow Street, Ordzonikidze, Building 11, Stroniye 11, Office 903. Tel - +74 959551886 Fax - +74 959551883 Zee Entertainment Enterprises Limited Continental Building, 135, Dr. Annie Besant Road, Mumbai 400 018. www.zeetelevision.com